Sales tax tokens were fractional cent devices used to pay sales tax on very small purchases in many American states during the years of the Great Depression. Tax tokens were created as a means for consumers to avoid being “overcharged”, by having to pay a full penny tax on purchases of 5 or 10 cents. Issued by private firms, by municipalities, and by twelve state governments, sales tax tokens were generally issued in multiples of 1 mill (1⁄10cent).
A 1935 Missouri 1 mill token, known in slang as a milk top owing to its similarity to milk bottle caps of the era. By $1LENCE D00600D at English Wikipedia, CC BY-SA 3.0,
Prior to the coming of World War I in the summer of 1914, only two countries, Mexico and the Philippines, made use of a general sales tax for national finance. Excise tax — a transaction tax on the sale of specific items — was broadly used, however, and the idea of a general sales tax was neither unknown nor obscure to political decision-makers in the United States.
A number of states issued colorful plastic tax tokens made in quantities running into hundreds of millions. The denominations on the token are numbers of mills (tenths of one cent). By $1LENCE D00600D at English Wikipedia, CC BY-SA 3.0,
Indeed, in 1921 there was a concerted effort to implement a 1% national sales tax in the USA by attaching it to the 1921 national revenue bill and 1922 legislation providing for a soldiers’ bonus.
Although the proposals for a national sales tax were defeated by an alliance of farmer and labor interests, the state of West Virginia implemented a 1% sales tax of its own in that same year, using the revenue so generated as a replacement for a corporate income tax. Improving economic conditions throughout that decade of the 1920s would leave West Virginia’s use of a sales tax unique among the 48 American states.
An aluminum sales tax token from the state of Washington, valued at 2 mills (1⁄5 cent) and good for the tax on purchase of 10 cents or less under the state’s 2% retail sales tax law. By $1LENCE D00600D at English Wikipedia, CC BY-SA 3.0,
In the 4th Quarter of 1929 a festering global economic crisis struck the United States. As unemployment skyrocketed, income tax revenue plummeted and defaults on property taxes spiked — and this at the very same time that calls for state spending on relief measures for the indigent and the unemployed were amplified.
Georgia’s early adoption of a sales tax in 1929 was followed by a wave of sales tax adoptions, spurred on by the deep financial crisis.
The year 1933 saw the adoption of sales taxes in no fewer than 11 additional states, including such population centers as New York, Illinois, California, and Michigan. The sales tax would be enshrined as a cornerstone of American state government finance from that date forward.
Square-shaped Illinois sales tax token By $1LENCE D00600D at English Wikipedia, CC BY-SA 3.0,
The twelve states that issued these sales tax tokens were Alabama, Arizona, Colorado, Illinois, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Utah, and Washington.
In addition to the fractional cent tokens used elsewhere, a closely related system of state-issued paper sales tax stamps and punch cards was used in the state of Ohio.
Sales tax tokens were generally regarded as a nuisance by consumers and were replaced in fairly short order by the bracket system of sales tax collection, which averaged out the tax on small sales. By the end of the 1930s, token use was eliminated in most of the issuing states, with sales tax tokens lingering in Missouri until late in the 1940s.
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