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Written By: Tayler G. Hansford
Member, American Journal of Trial Advocacy
Whether businesses can legally reject cash has been in the news this year. In the early days of the COVID-19 pandemic, many businesses began rejecting cash payments in favor of credit card payments. In large part, this was because of the minimal contact nature of credit payments along with a national coin shortage. By rejecting cash, these businesses caught the eye of many who believed doing so was illegal. One notable person to raise the question of whether businesses can legally reject cash was a state senator from Mississippi. In his viral Facebook post, Senator McMahan claimed that businesses that refused to accept cash payments were breaking the law. Senator McMahan presented his argument that businesses must accept cash by posting a photo of a $20 bill, and stating, “This paper money, this note, is Legal Tender for all debts, public and private.” This blogpost argues that, in most places in America, businesses may freely reject cash payments and require credit payments. This blogpost does not seek to make an opinion on whether going cashless, as a policy standpoint, is good or bad.
Senator McMahan is not alone in his belief that it is illegal for businesses to refuse cash. Many people on social media share his sentiments as well. For the most part, this belief stems from a federal law (“Legal Tender Law”) stating that Federal reserve notes (“cash”) “are legal tender for all debts, public charges, taxes, and dues.” However, according to the United States Department of the Treasury, the law does not require businesses to accept cash.
In Nemser v. New York City Transit Auth., the Transit Authority had a policy of only accepting tokens as bus fares. The tokens could be purchased at certain locations with cash, but the token was required to ride the bus. The plaintiffs argued that the Transit Authority “in refusing to accept dollar bills as bus fare” violated the Legal Tender Law. However, the New York County Supreme Court rejected that argument and held, “it strains logic that Congress would have intended the [Legal Tender Law] to preclude a payee from limiting the locations where certain types of cash payments may be made.”
Similarly, in Picano v. Borough of Emerson, residents were required to pay their property taxes either by check or money order. Plaintiffs brought suit when they attempted to pay their taxes in cash, but the Borough refused to accept the payment. The Picano Court held “there is no basis for concluding that defendant’s violated [the Legal Tender Law].” Likewise, in Erdberg v. On Line Servs, Inc., the Northern District of Alabama held that the Legal Tender Law was not violated when court fees were required to be paid by credit card.
There currently is a bi-partisan bill in the United States Senate sponsored by Senator Robert Menendez (D) of New Jersey and co-sponsored by Senator Kevin Cramer (R) of North Dakota. The bill, which is named the Payment Choice Act of 2020 (“PCA”), would prevent any “person selling or offering goods or services at retail to the public” from “refus[ing] to accept United States legal tender of cash as payment for goods or services . . . .” The PCA would carve out an exception for “any goods or services sold to the public by telephone, mail, or internet.” The PCA would also prevent businesses from discriminating against cash purchasers by “charg[ing] a higher price to any customer who pays by cash than customarily is charged to a customer using other forms of payment.” While this legislation has been introduced in the Senate, it is unclear whether it will ever make its way through the legislative process and become Federal law.
As a result of the current Legal Tender Law, it is clear that it “does not mandate that [businesses] must accept cash from [customers], rather [businesses] cannot refuse to accept U.S. currency for payment.” By requiring that customers pay with a credit card, debit card, check, or some online payment in U.S. dollars, then there is no violation of Federal law because “a dollar is a dollar, regardless of the physical embodiment of the currency.” Therefore, according to Federal law, “Private businesses are free to develop their own policies on whether or not to accept cash . . . .”
However, the analysis does not end at the Federal level. Just as there is nothing in the Federal law requiring businesses to accept cash, there is also nothing preventing states to require businesses to accept cash. The U.S. Department of the Treasury’s website indicates that a state law can require businesses to accept cash. Therefore, state and local governments can prevent businesses from going cashless.
So far, only two states and a few cities require businesses to accept cash. The Massachusetts law requiring businesses to accept cash states, “No retail establishment offering goods and services for sale shall discriminate against a cash buyer for requiring the use of credit by a buyer in order to purchase such goods and services.” However, this law is rarely enforced and many do not even know it exists. One reason for this may be because of the law’s “vagueness of what defines a ‘retail establishment . . . .’” New Jersey recently passed a similar law which states, “A person selling or offering for sale goods or services at retail shall not require a buyer to pay using credit or to prohibit cash as payment in order to purchase the goods or services.” The New Jersey statute is more clear about its definition of retail than Massachusetts by expressly exempting four types of businesses. While New Jersey and Massachusetts are the only two states that currently require businesses to accept cash, some cities across America require businesses operating within their municipality to accept cash. The reason states and cities enact laws that require businesses to accept cash is to protect poor people who may not have access to banks or credit cards from being further disenfranchised.
The New York City Council recently passed legislation “that prohibits stores, restaurants and other retail outlets from refusing to accept [cash].” Consumer advocacy groups argue that, by rejecting cash, poor people who cannot qualify for credit cards or are underbanked are at risk of not being able to purchase essential items. As a result, the New York City legislation is part of “an effort to blunt the impact of advancing technology on those who are unable to use it because of financial circumstances, unwilling to for philosophical reasons or vulnerable to its darker aspects.” This legislation went into effect on November 19, 2020.
Apart from those states and cities that require businesses to accept cash, businesses are free to reject cash payments. Currently, Mississippi does not prevent businesses from rejecting cash, but Senator McMahan has indicated that he plans to introduce a bill that would change that. Likewise, there is no law in Alabama that requires businesses to accept cash. In fact, most places in the United States do not require businesses to accept cash. Therefore, unless there is a state or local law prohibiting the practice, businesses are free to reject cash as payment.
 Aine Cain, Business Across the United States are Begging Customers to Pay with Credit or Provide exact Change as the Coronavirus Pandemic Continues to Drive a Coin Shortage, Business Insider, (Jul. 9, 2020) https://www.businessinsider.com/coin-shortage-exact-change-credit-stores-coronavirus-2020-7.
 31 U.S.C. § 5103.
 See Legal Tender Status, U.S. Dept. of the Treasury, https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx (“There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods and/or services.”).
 Nemser v. New York City Transit Auth., 530 N.Y.S.2d 493, 494 (N.Y. Sup. Ct. 1988).
 Picano v. Borough of Emerson, 353 F. Appx. 733, 734 (3rd Cir. 2009).
 Id. at 735.
 Erdberg v. On Line Info. Servs., Inc., No. 2:12-CV-3883-RDP, 2013 WL 5570062, at *5 (N.D. Ala. Oct. 9, 2013).
 S.4145-Payment Choice Act of 2020.
 Croley v. Hunting Creek Club Condo. Ass’n, No. 105CV1326CMHBRP, 2005 WL 5269272, at *3 (E.D. Va. Dec. 13, 2005).
 Crummey v. Klein Indep. School Dist., 295 Fed. Appx. 625, 627 (5th Cir. 2008).
 Legal Tender Status, U.S. Dept. of the Treasury, https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.
 See Samuel Erlanger, Note, A Cashless Economy: How to Protect the Low-Income, 2019 Cardozo L. Rev. de novo 166,182 (2019) (“The Federal Reserve takes a hands-off approach when it comes to private businesses’ payment policies; however, these policies must comply with state law.”).
 Alec Dent, Is It Illegal for Businesses to Refuse to Accept Cash?, The Dispatch, (July 16, 2020), https://factcheck.thedispatch.com/p/is-it-illegal-for-businesses-to-refuse.
 Mass. Gen. Laws ch. 255D, § 10A (1978).
 Erlanger, supra note 23 at 182.
 N.J. Stat. Ann. § 56:8-2.33(a) (West 2019).
 See Alina Selyukh, Cities and States are Saying No to Cashless Shops, NPR (Feb. 6, 2020), https://www.npr.org/2020/02/06/803003343/some-businesses-are-going-cashless-but-cities-are-pushing-back#:~:text=In%20the%20past%20year%2C%20Philadelphia,to%20accept%20cash%20since%201978 (explaining that New York City, San Francisco, and Philadelphia have all banned cashless businesses).
 See Samantha Marcus, N.J. Stores and Restaurants Must Accept Cash Under New Law Banning Them From Requiring Credit Card Payments, NJ.com (Mar. 18, 2019), https://www.nj.com/politics/2019/03/nj-bans-stores-and-restaurants-from-refusing-to-accept-cash-from-customers.html (“[E]xperts say cashless businesses disenfranchise consumers who can’t access bank or credit cards.”).
 Ed Shanahan & Jeffery C. Mays, New York City Stores Must Accept Cash, Council Says, The New York Times, (Jan. 23, 2020) https://www.nytimes.com/2020/01/23/nyregion/nyc-cashless-ban.html.
 See Ann Carrns, Who Gets Hurt When the World Stops Using Cash, The New York Times, (Sept. 11, 2020) https://www.nytimes.com/2020/09/11/your-money/cash-credit-cards-coronavirus.html (“Businesses that refuse cash put at a disadvantage people who lack traditional bank accounts or can’t qualify for credit cards, consumer advocates say.”).
 Shanahan & Mays, supra note 28.
 See Andrew Grymes, Cash Rules: New York City Businesses To Face $1,000 Fine For Failing To Accept Dollars, Coins As Payment, (Nov. 24, 2020) https://newyork.cbslocal.com/2020/11/24/new-york-city-cash-law-debit-cards-app-payments-ritchie-torres/.
 Legal Tender Status, U.S. DEPT. OF THE TREASURY, https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.
 See Senator Chad McMahan, Facebook, (cmt. to post from July 8, 2020) https://www.facebook.com/McMahanForMississippi/ (“I am currently drafting legislation that would require all Mississippi companies to have a method to accept cash or legal tender.”).
 See Kate Fitzgerald, The 10 Places Where the U.S. Wants to Mandate Cash, PaymentSource, https://www.paymentssource.com/list/the-10-places-where-the-us-wants-to-mandate-cash (providing a list of places where legislation has been introduced to require businesses to accept cash).