The U.S. Constitution, Art. I Sec. 10 Cl. 1, states, in part:
? No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; ... ?
There is no provision in the Constitution delegating authority to Congress to make anything legal tender, other perhaps than the broad authority over federal enclaves in Art. I Sec. 8 Cl. 17, or federal territories and possessions in Art. IV Sec. 3 Cl. 2.
In 1798, Vice President Thomas Jefferson wrote that the federal government has no power ?of making paper money or anything else a legal tender,? and he advocated a constitutional amendment to enforce this principle by denying the federal government the power to borrow.[5]
During the American Civil War, the federal government was unable to pay its debts with gold or silver coin, so began to issue paper notes to pay its debts, and when people refused to accept them in payment, Congress adopted the Legal Tender Act of 1862, compelling them to do so. Thus forced to accept federal notes, the recipients wanted to be able to use them to pay their own debts, and this led to litigation. The United States Supreme Court, with the support of judges recently appointed by President Ulysses S Grant, held that paper money can be legal tender, in the Legal Tender Cases, ranging from 1871 to 1884.
The United States Coinage Act of 1965 states (in part):
? 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. ?
31 U.S.C. § 5103.
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.