It’s just a one-store test, but news of the Starbucks experiment of refusing cash at its location in Seattle’s Russell Investment Center has certainly stirred up discussion.
It’s just a one-store test, but news that Starbucks is experimenting with refusing cash at its location in Seattle’s Russell Investment Center has certainly stirred up discussion.
Many readers had the same reaction to the policy that was quietly implemented Tuesday: Isn’t that illegal?
After all, just to the left of George Washington’s venerated visage on the $1 bill, an inscription declares in small block type: “This note is legal tender for all debts, public and private.”
“Since when does one get to unilaterally pick not to honor a bill of the Government that states it covers ALL debts, even private ones?” asked one reader.
The key word there is “debts,” said Jane Winn, a University of Washington law professor who specializes in commercial law and the impact of new technology on commerce.
“If you walk into a shop and it says, ‘Bananas, $1’” and you want to buy one, “there’s no debt,” she said. “That’s why retailers don’t have to accept payment media they don’t want.”
The rule declaring U.S. currency is acceptable for payment of debts traces back to the days when the dollar was backed by precious metals — and was enacted for a surprising reason, said Winn: “To prevent governments from paying their debts to citizens with paper currency while still demanding that citizens pay taxes with gold or silver coins.”
The Treasury Department’s website says the same thing, while directing the extra-curious reader to the Coinage Act of 1965 (specifically Section 31 U.S.C. 5103, entitled “Legal tender”), which says federal coins and currency “are legal tender for all debts, public charges, taxes, and dues.”
The Treasury clarifies that “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 companies can establish “their own policies on whether or not to accept cash unless there is a state law which says otherwise.”
That applies equally at both the high and low ends: “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.”
Or, increasingly, companies may take no cash at all. While many airlines have already switched to cashless payment for in-flight meals and drinks, The Miami Herald reported this week that American Airlines is now not taking cash for baggage fees and other payments at its passenger terminal in more than 50 locations.
Starbucks has said its experiment “will help us understand how cashless forms of payment may impact our customer experience,” and has not disclosed how long the test may run or whether it will try the policy in other stores.