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From the US Treasury:

According to the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled “Legal tender,” which states: “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.

Public Debts: This means that any existing public debt, charge, tax, or dues held in the US can be paid in any form of US legal tender. That includes coins, small bills, etc.

Feel free to walk into any courthouse or treasury office and pay a parking ticket in pennies, pay your property taxes in coins and small bills, and dump a truck bed full of nickels in front of the IRS Headquarters building. It is all legal payment and must be accepted by officials.

Private Transactions: The legal tender law is a federal law and does not apply to private businesses, people, or organizations. These entities are able to make their own financial policies regarding the form of payment. This is why stores are able to refuse bills larger than $20 or similar monetary policies when performing transactions. This also only applies to existing debts, not the purchase of goods or services, which no federal law covers. Therefore, a store can refuse to sell you something if you walk in the store with a little red wagon full of pennies.

Private transactions can also require payment in the form of proprietary tokens, coupons or other non-legal tender payments. A good example of this would be a bus or subway token, or tokens for slot machines.

Contradicting Example? Even though the law states that all debts can be settled in legal tender, Michael Powell, a Texas resident, was held in contempt of court and fined for paying a $1000 court settlement in pennies. The payment had to be made to an individual who won a court judgment against him. The $1000 assessment was due by a certain date and Powell made the payment in its entirety 2 days early – in pennies. He was sued and fined an additional $533 to pay for the time, expense, and legal fees the other person had to go through to cash his pennies and take him back to court.

Powell would probably have had his $533 fine reversed if he hadn’t told the judge at the appeals court his reason for paying in pennies – Powell answered that he wanted “to make a hardship upon [Tarlton, the person suing him],” for whom he had no respect “in any shape, form or fashion.”

He probably would have won on a further appeal, but how far do you really want to go to win back $500? He would have had to pay more than that in lawyer fees and court costs.

Conclusion: Stores can make their own policy in terms of which form of payment to accept, but public enterprises must accept any form of legal tender. Feel free to pay your taxes, court assessments, or other public debts in assorted coins and bills. But also be prepared to put up with some ticked off people if they have to count out every coin and dollar bill. Oh, and if you try this with the IRS, don’t be surprised if you get audited for the rest of your life!

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This excerpt from the U.S. Department of the Treasury’s website, written in response to a similar question:

“The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled ‘Legal tender,’ which states: ‘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.’

“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.”

So, the short answer is that the restaurant can set whatever policy it likes when it comes to payment, as long as it is established before a transaction occurs and the customer incurs the debt.

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questions & answers

Question: Can a company refuse payment with cash? A new policy became effective stating they will only accept money orders, and credit/debit. i was advise if i take cash they will tell me to get a money order.

Answer:

It is technically illegal to refuse legal tender (cash) for services already rendered, though it is not illegal to refuse it for services not yet rendered. Therefore, a business that accepts only checks or credit must post a notice indicating this, so that the customer is aware of the fact prior to making payment. According to the “Legal Tender Statute” (section 5103 of title 31 of the U.S. 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.” This means that all U.S. money, as identified above, when tendered to a creditor legally satisfies a debt to the extent of the amount (face value) tendered.

However, no federal law requires that a person or an organization must accept currency or coins as payment for goods or services not yet provided. For example, a bus line may not allow payment of fares in pennies or dollar bills. Some movie theaters, convenience stores and gas stations as a matter of policy may refuse to accept large bills, such as above $20, and as long as there is a notice posted and a sale for goods or services has not already been completed, these businesses have not violated the legal tender law.

If the company has posted a notice about the new policy of only accepting money orders and credit/debit, they have fulfilled the requirement, and they are not required to accept cash for purchases. For more information you can visit the Federal Reserve online.