The Stamp and Coin Place Blog: connecting the past and present of stamp and coin collecting, and looking to the future.

Sales Tax Tokens. What are they?

$1LENCE D00600D at English Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

In today’s world, in most states, sales tax is common place.  We pay it, we accept it and we move on.  At the turn of the 20th century, this was not the case.  Although several countries around the world had a sales tax of some sort, the idea had not been brought to the United States yet.

In 1921, a national 1% sales tax was proposed in a national finance bill.  It was not passed, much to the delight of farmers and other labor interests.  The state of  West Virginia took it upon themselves to implement a state wide sales tax of 1%, which would serve as an example for the rest of country later on.

By 1929, the Great Depression had struck and state governments were trying desperately to make up for the great loss in income tax and out pouring of relief funding due to the overwhelming increase in unemployment.  Many states started to look at West Virginia’s sales tax as a viable option for making up some of the lost revenue.  In 1929, Georgia adopted a state sales tax and by 1933, 11 other states had followed suit.

Illinois_Square_Tax_Token

The one main problem with sales tax was the odd sales totals that were created.  The basic idea is as follows: Retailers would pay a tax on everything they sold.  This added cost was passed on to the consumer.  If, for example, a person bought something for 10 cents (remember, this is the 1930’s) and there was a 3% sales tax, the total for the item would be 10 cents plus three tenths of a cents for the tax.  Being as there was no three-tenths of a cent coin, the retailer would either lose money by rounding down, or upset the customer and over collect by rounding up.

Enter the sales tax token.

$1LENCE D00600D at English Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

$1LENCE D00600D at English Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Sales tax tokens allowed for merchants to round up to the nearest cent with out over collecting (making a 10 cent item 11 cents).  The customer would pay the additional tax, and in exchange would receive a tax token that could be used to pay the sales tax on their next 10 cent purchase since, technically, they already paid it.

Confused yet?

Not only did people have to remember to bring their tax tokens along with them, but with over 500 different types and denominations from 12 states, people quickly grew confused and didn’t know what to use when or where.

$1LENCE D00600D at English Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

$1LENCE D00600D at English Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

By the time World War II rolled around, ration tickets and food stamps were handed out, adding to the confusion.  Most states began dropping tax tokens altogether.  Missouri was the only state to come out of WWII with tax tokens still on their books.  In 1961, they finally dropped them.

By 1969, all but 5 states had enacted some type of sales tax and today that number remains the same today.  Although we no longer use tokens to keep things even, they do still exist in the world of collectibles.  We just came across some in our shop a few weeks ago. and have them listed on Ebay.  Check them out and consider adding this neat piece of history to your collection today.

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