It is a widely held belief that, in the United States, a business must accept cash payments from a consumer. Some people take the argument a step further, arguing that if a business refuses to accept cash from a customer, the business loses its ability to charge the customer. Neither belief is true.
Paper currency in the United States is printed with the provision that it is "legal tender for all debts, public and private", language that flows from the provisions of a federal law, 31 U.S.C. Sec. 5103,
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.
The principal purpose of that statute is to ensure the nationwide acceptance of U.S. currency, consistent with constitutional language1 that reserves to Congress the power to create a uniform currency that holds the same value throughout the United States. While the statute provides that U.S. money is legal tender that may be accepted for the payment of debts, it does not require acceptance of cash payments, nor does it provide that restrictions cannot be imposed upon the acceptance of cash.
Federal law does not prevent a private business from developing its own payment policies and procedures, including policies that restrict or reject payments in cash. For example, a business may require that payment be made by credit card, may require check or money order, may have a policy against accepting large bills, or may combine restrictions of that nature when creating a payment policy.
Federal law is not going to be amended or re-interpreted to require all businesses to accept cash payment, as many contexts exist in which the acceptance of cash would create significant burdens on a business, increase cost, reduce efficiency, and even create potential risks to a business and its employees. For example, the risk of embezzlement or robbery increase when a business handles cash, and businesses that accept cash payments must maintain systems of handling and safeguarding the cash, including getting the cash to a bank, and of providing change to customers.
Debts vs. Purchases or Exchanges
Some courts have emphasized that the language of 31 U.S.C. Sec. 5103 relates to the payment of debts, which they define as preexisting debts, and therefore that the parties to a transaction or exchange do not have to agree to accept cash as payment for goods or services. Neither 31 U.S.C. Sec. 5103 nor any other federal law requires that a private business, organization or person accept cash in exchange for goods or services.
State Law May Require a Private Business to Accept Cash
Although as a general rule a private business may restrict or refuse to accept cash payments, at times states will mandate that a business accept cash or limit any restrictions a business may impose on cash payments. For example, some states require that a landlord accept rent payments in cash. Many states require that a private impound lot accept cash payments by an owner seeking the release of a motor vehicle.
When acceptance of a cash payment is required by state law, the state will often impose a penalty or other consequence on a business that refuses to accept cash. For example, in California a landlord's refusal to accept cash payment of rent may cause the payment to be deemed excused. The failure to comply with state law subject a business to possible investigation by the state, and to possible fines for its non-compliance with the law or in some contexts even to a potential criminal penalty.
Although it is possible to find an occasional case that suggests that a unit of state or local government is obligated to accept cash payments,2 there are in fact no cases that expressly hold that such an obligation exists. When courts have been called upon to address the issue, they have consistently found that government restrictions on whether, when, where and how cash payments may be made are permissible under the law.3
For example, somebody who wants to pay a municipal bill, a fine or tax debt with cash may be required to do so through a cashier's office during its regular business hours, so that the payment can be properly counted and a receipt may be issued. A municipal bus service or similar transportation service may use a non-cash system of tokens or passes, and is not required to accept cash at every point of service. Some courts have explicitly found that no entity, including a government office, is required to accept cash.4
At times, debtors have attempted to pay bills with small change, such as by bringing thousands of unrolled pennies into a business or government office to pay a bill or obligation, insisting that they have the right to pay in that manner. Although making a payment in a manner that is inconvenient to the recipient is not of itself unlawful, doing so with the intention of flouting a court order, disrupting the operations of an office, or burdening the recipient's staff is not without peril.
A few years ago, a debtor was charged with disorderly conduct after dumping 2,500 pennies on the counter of a medical office, insisting that they accept the pennies as payment of his bill. As it does not appear that the office otherwise restricted payment in coins, he might have avoided that consequence had he presented a bag of neatly rolled pennies or had he at least not send the coins rolling and spinning across the counter.
In another case, a man had some friends deliver thousands of unrolled pennies to a lawyer's office to pay a judgment awarded to the lawyer's client, causing the lawyer to file a petition to hold him in contempt. The court did not make a contempt finding, but did order the man to pay the bank fee associated with processing the pennies, ordered the man to pay additional legal fees associated with the lawyer's motion, and ordered that payment of the sanctions be made with folding money.
Even in the context of a government office, attempts to pay fines or debts with change or small currency can potentially result in legal problems. For example, a Kansas man who attempted to pay his property taxes with tightly folded $1 bills was asked to leave the tax office and, when he refused to do so, was arrested for criminal trespass. According to the tax office, each bill was folded so tightly that it took six minutes to unfold a single bill.
When paying for goods or services in cash, or paying a debt or fine, here are some points to remember:
Use Cash if It's Convenient to You - If the payee accepts cash, the reason to pay in cash it out of convenience to yourself. When you try to make a cash payment to disrupt the payee's operations or to inconvenience the payee, you may end up creating problems for yourself.
Refusal of Cash Does Not Erase a Debt - Absent a law that specifically imposes a consequence on a payee for refusing cash, a refusal to accept cash will not impair the payee's right or ability to collect a debt.
Don't Send Cash Through the Mail - If the cash disappears before it is processed by the recipient, good luck convincing anybody that you actually mailed the money.
Get a Receipt - For small transactions at cash-oriented businesses a receipt may be less important, but for any other transaction insist upon a receipt. Otherwise, even when you're dealing with a legitimate business, you may find that they later claim to have no record of the payment and insist that they never received the money.
1. U.S. Constitution, Article 1, Section 10, Clause 1, "No State shall... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts...."
2. See, e.g., Nemser v. New York City Transit Auth., 140 Misc.2d 369, 530 N.Y.S.2d 493, 494 (1988), which applies a reasonableness standard to when a municipality must accept cash payments.
3. See, e.g., In re Reyes, 482 B.R. 603 (2012), in which a federal bankruptcy court upheld a trustee's order that the petitioners "make payments using only certified funds, automatic wage withdrawals, or electronic transfers".
4. See, e.g., Picano v. Borough of Emerson, 353 Fed.Appx. 733, 735 (3rd Cir. 2009).