Legal Tender Laws 101

I don’t know how I missed this post from March, but I did. Here is Joe Salerno talking how the IRS “violates” legal tender laws. 

 … the last time I checked, the Federal Reserve Notes in my wallet all still bore the notice, “This note is legal tender for all debts public and private” This means that they cannot be refused by the creditor for repayment of a debt previously incurred–especially not for payment of taxes, which are the pre-eminent “public debt.” While the IRS may not be strictly in violation of legal tender laws, because one can still use cash to pay at some IRS offices, its anti-cash policy is just another tactic in the Federal government’s relentless war to stamp out cash payments.

Two points should be made here to clear up confusions of legal tender laws.

  1. The notice on the dollar bills of legal tender does not necessarily mean that the creditor cannot refuse repayment of a debt previously incurred. If this were true, then it would be illegal for private businesses in the United States to set up their own payment policies. The misunderstanding here is that Salerno thinks that because of legal tender laws, everyone MUST accept cash, but this is a big misunderstanding of what the law means. *
  2. Salerno also states: “While the IRS may not be strictly in violation of legal tender laws, because one can still use cash to pay at some IRS offices,” Salerno is again misunderstood. Again, think of a private business. Legal tender laws don’t prevent a business to accept payment purely in gold, for example. This is not a violation. Its not like we can go up to this business show them a dollar bill and the “This note is legal tender for all debts public and private” notice and demand that they accept cash instead of their policy of accepting gold for they are in violation of the law. Doesn’t this sound silly when applying this to private business, but Salerno is doing exactly this in criticizing the IRS payment methods.

Of course it should be stressed that this is just looking at the Federal law, and not the State law, which can add to the Federal Law. So there may be some states where payment in gold only is illegal, but that has to do with State not Federal law.

And even the Treasury Department’s website addresses this issue that Salerno brought up. In the FAQs, one of the questions is:

I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn’t this illegal?

The answer in short:

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.

So no, I don’t think this is an example of the Federal government’s “relentless war on cash payments” as Salerno claims, if anything this is just an example of “how , starting with a mistake, a remorseless logician can end up in bedlam”

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