No Taxation Without…Tokens?

Colorado became a state on August 1, 1876. While searching for something interesting for a blog to celebrate Colorado’s birthday as a state, we came across something unusual in the collection.

Known as sales tax tokens, these pieces were used to pay sales tax on small purchases in some states during the years of the Great Depression. In 1929, many state governments began looking for ways they could make up the loss in income tax as unemployment rose. West Virginia had implemented a 1 percent sales tax as early as 1921 and other states began to look towards it as an example. While the sales tax created revenue, it also created odd sales totals. If a person made a purchase of only 10 cents and the sales tax was 3 percent, that meant there was three tenths of a cent due in tax. Either the retailer lost money by rounding down or they over collected by rounding up. This is where these tokens entered the picture.

The merchant could round up to the nearest cent, then the customer would receive a tax token that could be used on future purchases. Of course, this meant people had to remember their tax tokens and it could be confusing with so many extra tokens. The tokens were in multiples of one mill, which was 1/10 of a cent. With all the extra tokens needed for purchase, the system was generally not well received and most states discontinued their use by the beginning of WWII.

Only twelve states used these tax tokens, Colorado included. The tokens pictured above are all two mills due to a state sales tax of 2 percent. These tokens were made of a variety of materials including (left to right) plastic, cardboard, and aluminum. Colorado began using the sales tax tokens on September 1, 1935 and discontinued use on February 28, 1945, according to American Numismatic Association curator, Doug Mudd. As one of only twelve states to use these tokens, these show just a small bit of unique history of our state.

Happy 143^rd Birthday Colorado!

The information presented in this article is compiled using research conducted by the Royal Gorge Regional Museum and History Center.