When it comes taxes and duties, 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 save a ton of 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).
So what exactly is duty-free and how can it save you so much? We’ll tell you…
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, often for considerably cheaper than what’s available at home.
Since a set of special rules apply for places like airports and cruise ships, they are able to sell goods in these stores without having to pay import taxes (or duty) on them first. Most consumers never see this tax or even know it exists — but when goods like alcohol or cigarettes are imported to a country, most governments charge a duty on its value. In addition, many jurisdictions have heavy taxes on things like alcohol or cigarettes, no matter where they are from. Depending on where you live, this can be a tax 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.
Duty Free Doesn’t Mean Tax Free
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. Once you get back home from your cruise, then you have to go through customs.
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 the item(s) you are bringing and the amount of goods you are bringing in. However, for most 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.
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.
So how much in alcohol or cigarettes can you bring back in? 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).
If you are sailing from Texas, however, then you will be subject to state laws. 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 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.
- Texas laws allow you to bring back a total of only 1 gallon of alcohol or 3 gallons of wine per adult.
- Amounts above your personal exemption are taxed at a rate of 3%.
- Every bottle of alcohol or pack of cigarettes brought into Galveston will be taxed ($3.75 per liter/$1.50 per pack).
So if you bring back a single liter of alcohol from the duty-free shop on the ship or in a port, you can expect a tax of $3.75. Expect each additional bottle to be taxed at $3.75 plus 3% of the purchase price (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 much cheaper.