Upvote:3
"The world’s first airport duty free shop was opened at Shannon Airport by Dr Brendan O’Regan in 1947 to serve trans-Atlantic airline passengers travelling between North America and Europe. Flights would stop at Shannon on both legs to refuel and passengers had time to kill before continuing on their journey. Such a captive audience surely had sales potential! The argument by Dr O’Regan and his team was that, having passed passport control, the passenger had left the country and therefore the duties/taxes of that country became invalid. So everything bought after passport control should be considered as duty-free. The idea was given the go-ahead in Ireland and the shop was an instant success." taxfreetravel.com
OP expanded the scope of the question to request a history of the evolution of duty free shops; a short history is provided in history of duty free.
That page goes on to clarify:
In 1944 this right was extended to passengers on international flights • but it was Dr O’Regan who brought the concept of duty free into the airport itself and in 1954 international agreements on allowances were agreed in the New York Convention on International Travel. At this time Customs were still fairly anti the concept of ground shops being allowed to sell duty free to travellers and initially orders had to be taken landside (eg before passport control) and then the goods would be delivered in sealed bags to passengers at the Gate as they boarded. HistoryOfDutyFree
Food and Wine expands on the 1954 New York Convention on travel
Of course, he couldn’t make that decision for every country in the world, so O’Regan brought his proposal to the New York Convention on International Travel in 1954, where everyone could decide on the particular duty-free rules.