When it comes cruising and duty-free shopping, don’t feel alone if you’re left confused. The labyrinth of regulations and rules regarding what is taxed and what isn’t can give you a headache.
At the same time, however, you can use these rules to your advantage and potentially save money on things like alcohol, cigarettes, and other pricey goods that are for sale in the duty-free shops that are onboard nearly every cruise (and in many ports of call).
So what exactly is duty-free and how can it save you?
What Is Duty-Free Shopping?
If you’ve traveled on a cruise before, or been to an international airport, you’ve likely seen the bright signs for duty-free shopping. Inside these stores is like a trip to a sinner’s paradise. You’ll find fancy jewelry, alcohol, cigarettes, perfumes, chocolates, and more.
Since a set of special rules apply for places like airports and cruise ships, they are able to sell goods in these stores without consumers having to pay the same taxes on them that you’d see on land.
For example, if you were to buy a bottle of alcohol in Miami, it would cost you not just the price of the bottle, but also the sales tax (7.0%) that’s tacked on.
In addition, many jurisdictions have heavy taxes on things like alcohol or cigarettes, that are brought or produced in a country. Most consumers never see these taxes or even know they exist. So depending on where you live, there can be taxes at the federal, state, and city level. Of course, all that tax is then passed on to the final consumer in the form of a higher price.
Since duty-free shops get a pass on these rules, they can offer savings compared to back home. To see a price comparison of duty-free goods on a ship versus on land, see our article here or keep reading.
How Duty-Free Shopping Works on a Cruise Ship or in Port
There’s no missing duty-free shopping on a cruise. There will be a shop on any large cruise ship you sail, attractively outfitted with a wide selection of alcohol, cigarettes, and other goodies. For those who like to have a drink or a smoke, you will be like a proverbial kid in a candy store.
As well, often when you head into port, duty-free shopping will be prominently featured. Some spots even have passengers walk through the shops as they walk off the ship into port.
Don’t go thinking, however, that you can buy discounted goodies to enjoy on the ship. If you buy a bottle of alcohol either on the ship or in port, you don’t get to enjoy it right away. Instead, it’s put in a sealed box.
If bought on the cruise ship, it will be held by the staff and delivered to your room the last night of the cruise. If bought while in shore, it will be taken by the cruise staff when you get back on board and returned at the end of the trip.
Duty-Free Doesn’t Mean Completely Tax-Free (Despite the Signs)
On the ship and in port, you’ll see signs advertising tax and duty-free. In that case, you can buy them on the ship without extra taxes. What you see is what you pay.
What this doesn’t mean, however, is that you are done with the taxman… or that you can simply buy barrels of booze and cigarettes to last you a year and bring them home.
That’s because once you get back home from your cruise, then you have to go through customs in the port terminal.
At customs, you must declare everything of value that you are bringing back to the United States — including things you bought in duty-free shops.
In most cases (there are all sorts of caveats), you are allowed up to $800 per person in goods before being charged duties on the amount. Duty amounts vary based on what item(s) you are bringing and the amount of goods you are bringing in. However, for many items, they run 3% for the first $1,000 over the $800 allowance.
There are exceptions for alcohol and cigarettes.
If you are bringing in alcohol, you are allowed only one liter of alcohol per person under the personal exemption rules. You can bring in 200 cigarettes (or 100 cigars) per person under the personal exemption. Beyond that, you will be charged duty taxes on those items — even though the value is still less than $800.
So how much in alcohol or cigarettes can you bring back in? For alcohol there are no federal limits on how much you can bring, within reason. The rules call for the allowance for enough goods for “personal use.” So if you’re trying to lug home cases of booze, then you likely won’t get past customs (they’ll think you’re trying to import it for sale).
For tobacco, the limit (except in a few special cases) is 200 cigarettes or 100 cigars. You can see the full details of duty rules at the Customs and Border Patrol website.
How Much You Will Be Taxed
How much will you be charged? It only comes out to be a few dollars per bottle. According to the Customs and Border Patrol website:
“The flat duty rate will apply to articles that are dutiable but that cannot be included in your personal exemption, even if you have not exceeded the exemption. For example, alcoholic beverages. If you return from Europe with $200 worth of purchases, including two liters of liquor, one liter will be duty-free under your returning resident personal allowance/exemption. The other will be dutiable at 3 percent, plus any Internal Revenue Tax (IRT) that is due.”
For that reason, it’s a good idea to save receipts.
Special Rules for Galveston Cruise Passengers
If you are sailing from Texas, things are a little different. There, you will be subject to state laws surrounding importing alcohol. Specifically, “the law limits personal importation by an adult to once every 30 days with limits of: 1 gallon of distilled spirits, 3 gallons of wine, and 288 ounces of malt beverages (24 12-ounce containers).” Keep in mind that this is per adult. So a couple can bring in twice as much.
Furthermore, the Texas Alcoholic Beverage Commission has enacted a tariff where “cruise travelers disembarking out of the Port of Galveston will need to pay the tax for alcoholic beverages and cigarettes imported into the state that were purchased either on the ship’s duty free store or at a foreign port of call.”
That means every bottle or cigarette you bring back home will see a small tax. The tax runs about $3.75 for a liter or alcohol and $1.50 per pack of cigarettes. And to our knowledge, there is no personal exemption. Every bottle is hit with this tax.
To recap, here’s what you can expect when you bring goods through customs in Galveston:
- Personal duty exemption of $800 of goods, including 1 liter of alcohol, and 200 cigarettes per adult. (Federal)
- Texas laws allow you to bring back a total of only 1 gallon of alcohol or 3 gallons of wine per adult. (State)
- Amounts above your personal exemption are taxed at a rate of 3%. (Federal)
- Every bottle of alcohol or pack of cigarettes brought into Galveston will be taxed ($3.75 per liter/$1.50 per pack). (State)
So if you bring back a single liter of alcohol per person from the duty-free shop on the ship or in a port, you can expect a tax of $3.75 from the state. Expect each additional bottle to be taxed at $3.75 (state) plus 3% of the purchase price (federal), unless traveling with more than one adult. Keep this in mind when you’re comparing prices to what you would pay back home. Even with the tax, items bought in the duty-free shop can still be cheaper.
Is Duty-Free Shopping on a Cruise a Good Deal?
So how much can you save from shopping duty-free? Much of that depends on what you’re buying and where you live. Those living in states that have high taxes on things like cigarettes and alcohol will obviously benefit more from shopping duty-free.
As well, there are often discounts for buying multiple bottles, although keep in mind they will see a tax when bringing in more than one liter into the United States. For example, bottles of Grand Marnier seen on a recent cruise ran $36 each for a one-liter bottle, but two bottles for $60.
Also, bottles are most often one-liter when for sale on a cruise duty-free shop, compared to 750 mL you often find on land. So bottles are 33% larger than usual.
Below is a round-up of prices recently seen on a cruise to give you an idea of what you’ll pay compared to back home. Remember, this doesn’t include any tax that you might have to pay on land.
When we price compared these items to similar products at a local discount liquor store, we found prices in the duty-free shop were in-line or a few dollars cheaper in most cases. Deals from the duty-free shop were especially good when buying multiple bottles.
At the same time, the liquor store at home typically sells smaller bottles for around the same price as larger one-liter bottles on the ship. Finally, there isn’t tax charged at a duty-free point of purchase, which saves you even more when compared to land.
In other words, the prices compared to back home aren’t mind-blowingly lower, but do save you a decent amount, especially since there isn’t any sales tax.