It took me 37 years, but I finally figured out what the deal with “duty free” shopping is. Here’s the best answer I found on the web.
Summary: if I buy a bottle of “duty free” alcohol in the US, and come across the border into Canada, the bottle is not “free” of Canadian duty — in other words, it’s still subject to any taxes or duties that Canada wants to apply.
The duty that is free is that which the duty free store would have had to pay to import the bottle originally into the US but for the fact that they’re not going to sell it in the US, and are therefore exempt therefrom.
The theoretical savings from buying duty free products, thus, derives only from the seller of duty free products being able to offer lower prices because they don’t have to pay duty to import the products in the first place.