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A business can refuse to accept currency as payment for goods and services, even though the currency states that it is legal tender for all public and private debts.
A business can also refuse to accept large bills.
A business can provide customers with a discounted price for paying with cash.
Businesses May Refuse To Accept Cash, or Certain Types of Cash, as Payment for Goods and Services
Although United States currency indicates that it is legal tender for all debts, public and private, a business can still refuse to accept cash, or to refuse to accept certain types of cash, such as large bills.
According to the United States Department of the Treasury, all United States money constitutes a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a state law that says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.
The key issue, and the legal analysis the courts have used but which is not always obvious, is that while coins and currency are legal tender under the law, the law does not require that coins or currency be accepted. A business could insist on being paid with John Elway football cards. Bartering is also an example of how services can be paid for without currency. A business, such as many Internet websites, can insist on being paid solely by credit cards. Some mortgage agreements provide that te lender will only accept certified bank checks and not currency. The examples where a business may dictate how it will be paid, or limit the types of currency it will accept, are varied and legal.
Statutes
Title 31 § 5103 of the United States Code:United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.
Historical References
31 USC Section 392 (Section 102 of the Coinage Act of 1965) provided:ll coins and currencies of the United States, regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties and dues. Foreign gold or silver coins are not legal tender for debts.
In 1982, the law was revised and recodified as 31 USC § 5103 to read:
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts. Foreign gold or silver coins are not legal tender for debts.
The rationale for the change was that the words ''All . . . regardless of when coined or issued'' could be omitted as unnecessary because of the restatement. The word ''debts'' was substituted for ''debts, public and private'' to eliminate unnecessary words. The words ''public charges, taxes, duties, and dues'' were omitted as included in ''debts''
In 1983, the law was last revised, restoring to section 5103 the reference to "public charges, taxes, and dues" after "all debts" because they are not considered to be debts. Hagar v. Reclamation District No. 108, 111 U.S. 701, 706 (1884).
In Hagar v. Reclamation District No. 108, 111 U.S. 701 (1884), the Supreme was called upon to determine the validity of California laws which allowed for land in reclamation districts to be taxed so that swamp land could be reclaimed into useful land, but if the taxes were not paid for the land to be sold to pay the delinquency. In the course of dismissing several objections raised by the landowners because the objections did not raise federal questions (the Supreme Court generally only considers federal matters), the court noted at pages 706-707:Nor is there anything in the objection that the law requires the assessment to be collected in gold and silver coin. The original act of 1868 did not prescribe the currency in which the charges were to be paid, but before the assessment was levied it was amended so as to require payment in gold and silver coin. The acts of congress making the notes of the United States a legal tender do not apply to involuntary contributions exacted by a state, but only to debts, in the strict sense of that term; that is, to obligations for the payment of money founded on contracts, express or implied. This point was decided in Lane Co. v. Oregon, 7 Wall. 71, with reference to the first legal-tender act of 1862. Subsequent acts imparting the legal-tender quality to notes did not change the general language of that act. They make such notes a legal tender 'in payment of all debts, public and private, within the United States.' In the case mentioned a statute of Oregon requiring the payment of taxes for state and school purposes to be collected in gold and silver coin was sustained on two grounds: First, that it was the right of each state to collect its taxes in such material as it might deem expedient, either in kind, that is to say, by a certain proportion of products, or in bullion, or in coin, the court observing that the extent to which the power of taxation of the state should be exercised, the subjects upon which it should be exercised, and the mode in which it should be exercised, were all equally within the discretion of its legislature, except as restrained by its own constitution and that of the United States, and by the condition that the power could not be so used as to burden or embarrass the operations of the federal government; and, second, that he legaltender act had no reference to taxes imposed by state authority, but only to debts, in the ordinary sense of the word, arising out of simple contracts, or contracts of specialty, which include judgments and recognizances. Assessments upon property for local improvements are involuntary exactions, and in that respect stand on the same footing with ordinary taxes. They are, therefore, covered by this decision; the state could determine in what manner they should be discharged.
The Hagar decision thus observed that while United States notes are legal tender, the states have the authority to decide the form in which payments may be allowed or not allowed. This decision has also been interpreted to mean that absent a contrary state law, private parties, such as businesses, can create their own policies as to what they will accept for the payment of goods and services.
According to the Bureau of Engraving and Printing:Note: this reference to a 1965 law that was changed in 1982 is on the Bureau's current website. Check it out. If the website has been updated or the page has changed, here is PDF copy of the website taken in 2003.Legal Tender: A Definition
Section 102 of the Coinage Act of 1965 (Title 31 United States Code, Section 392) provides in part:
"All coins and currencies of the United States, regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties and dues."
This statute means that you have made a valid and legal offer of payment of your debt when you tender United States currency to your creditor. However, there is no Federal statute which mandates that private businesses must accept cash as a form of payment. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.
The United States Department of the Treasury, in its "Education ... Learning Vault" similarly refers to decades old law:
I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn't this illegal?
The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 102. This is now found in section 392 of Title 31 of the United States Code. The law says that: "All coins and currencies of the United States, regardless of when coined or issued, shall be legal-tender for all debts, public and private, public charges, taxes, duties and dues."
This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.
Again, here is a link to the Treasury Department's website. If the link has changed, a 2003 PDF copy of the web page is available.
Cases
In Nemser v. New York City Transit Authority, 530 N.Y.S.2d 493, 140 Misc. 2d 369 (1988), plaintiff bus riders sued because the bus refused to accept dollar bills as bus fare. In an opinion rejecting this claim, and after noting that the parties had discussed "beaver pelts, wampum and the enforceability of contract gold clauses during the Great Depression," the court held that "the Federal legal tender statutes [31 USC § 5103] cannot be interpreted to require acceptance of a particular denomination of currency." The court noted that cases going back a hundred years had recognized a standard of reasonableness that permits carriers to decide what payments that would accept - including a refusal to accept large bills. "Thus, the absolute language of the legal tender statute is clearly modifiable by the necessary consideration of what is reasonable under the circumstances." (tendering a $5 bill to pay for a 5 cent fare is not reasonable) Although the court discussed this standard of reasonableness, it did not decide that a reasonableness standard limited the types of payments a business could decide to accept.
In a loosely related case, WMC Mortgage Corp. v. Burckhardt, 251 Wis.2d 480, 640 N.W.2d 564 (Wis.App. 2002), during a foreclosure sale a bank bid $84,144.06 for Mr. Burckhardt's property, but Mr. Burckhardt claimed that his bid of $26.10 should have been given precedence because it was offered in silver coin. Ruling that the argument was frivolous, the court stated "Burckhardt's claim that only bids made in gold or silver coin are proper is without merit because Federal Reserve notes have been made legal tender by virtue of 31 U.S.C. §5103 (previously numbered 31 U.S.C. §392). See Kauffman v. Citizens State Bank of Loyal, 102 Wis. 2d 528, 533, 307N.W.2d325 (Ct. App. 1981). That statute does not violate U.S. Const. art. I, §10, which provides that "[n]o state shall ... make any thing but gold and silver coin a tender in payment of debts," because the statute was enacted by Congress, not a state."
In Schmidt v. Iowa County, No. 1-533 / 00-1408 (Iowa App. 10/24/2001), a person claimed that a pipeline company agreed to make certain payments in gold or silver coin. The court noted in its discussion that "While parties can contract for payment in a form other than notes, paper currency, or bank drafts, Schmidt has not established that the Pipeline agreed to payment in gold or silver." The import of this statement is that private businesses can decide what forms of payment they will accept as payment for their goods or services.Are Stamps Legal Tender?
No. Stamps are not legal tender as they are not coins or currency.
Cash Discounts are Permissible
In California, businesses may offer their cash paying customers a price discount.
However, a California business may not impose a price surcharge upon customers paying with a credit card.