Sales Tax Tokens were introduced in the Great Depression era by several states when the introduced sales taxes for the first time. Many people were concerned that the state governments would be pocketing an "unfair share" of tax on low priced items. For example, in Washington state, the sales tax rate was 2%. How do you pay a 2% tax on an item only worth 10 cents? Paying 1 cent in tax on it would be a 10% tax, not a 2% tax.
The solution: tax tokens, worth fractions of a cent. This Washington token does not have the face value actually on it, but it was worth 2 mils, or 1/5th of a cent. Now, you could pay your state the 2% tax it deserved on a 10 cent item: give the store one of these tokens. Or, pay 1 cent in tax, and get four of these tokens back in "change". If you collected 5 of them, the state guaranteed you could get them exchanged back for 1 cent.
Sales tax tokens were ruled by Treasury as Unconstitutional, as they were considered to be states coining their own money, in clear violation of Article 1 Section 10 of the Constitution, however it never went to court; except in cases where the tokens resembled federal coinage too closely. The tokens were largely abandoned during WWII. With ration tickets and real money, having sales tax tokens in people's purses as well made the simple act of buying essential commodities a complex burden. They were also inconvenient, with the banks not accepting them and they were only "spendable" in the state of issue. Finally, the aluminium and brass most of them were made of were needed for the war effort (some states produced cardboard or fibreboard replacements during this time; some postwar issues were made of plastic).
The federal government briefly considered issuing its own 1 mil and half-cent legal tender coins in conjunction with a proposed federal government sales tax, to replace the state taxes and tokens, but scrapped the idea as not being worthwhile. By the prosperous 1950s, most people didn't care about their states pocketing unjustified fractions of a cent in tax. Missouri was the last state to retain tokens on their law books when they were eventually struck down in 1961, though no actual tokens had been issued there for some years previous.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
Posted 04/27/2020 2:33 pm
