When you make a purchase from a store, the clerk usually hands you a receipt. On the page is the item's price with the state sales tax conveniently listed just below to show the total payment.
For big-ticket items, that sales tax can be sizable in itself. But what about small purchases? That was the dilemma faced by Missouri and 11 other states when they first implemented state sales taxes in the 1930s in the midst of the Great Depression. For a few months, their solution created something of a constitutional crisis.
Sales taxes were uncommon in early history. References to sales taxes under Nero in Roman times and then in medieval France are the oldest. There had been talk in Congress of implementing a 1% national sales tax during the Civil War in 1862, but it was never adopted. As a rule, the U.S. did not use that financial tool until the 20th century.
World War I saw the new federal income tax rate dramatically increased to help fund the war effort. After the war, there was a proposal for a federal sales tax to help pay for the recent war and to fund bonuses for veterans in 1921. A coalition of farming and labor successfully stopped it. But West Virginia did pass its own 1% sales tax in 1921, the first state to do so. Its sales tax revenue was used to replace a corporations tax.
That was the situation until 1929, when Georgia became the second state to adopt a state sales tax. The stock market crash that fall and the deepening business slowdown brought budget problems to states as revenue from income taxes and corporation taxes fell. Pressure on states to find new tax revenue was intense. Sales tax was one option.
Sales taxes in the Great Depression
By the mid-1930s, 12 states had adopted a sales tax. But it was not without opposition. Missouri's Legislature bitterly wrangled for a month before finally settling on a 1% sales tax to go into effect in August 1935. Missouri cities at the time were not permitted to have sales taxes. However, this tax brought its own implementation problems.
Prices for everyday items in the 1920s were often less than $1. Deflation depressed prices even more. An ad for Sunday dinners at Joplin's Maxwell's Cafeteria ranged from 50 cents to 75 cents for a roast leg of lamb, baked ham, loin of pork or chicken with brandy sauce. How do you pay a tax that amounted to less than a penny? Drugstores such as Jamison's ran ads in the Globe where nothing cost more than $1. Ben Scott's grocery ran an ad for almost 100 separate items where the highest price was 80 cents for a 24-bottle case of Coca Cola.
Some state officials took a jaundiced view of the tax. Missouri Attorney General Roy McKittrick opposed the way the law's bracketing system collected tax on sales less than a dollar. State Auditor Forrest Smith despaired at how to implement the tax if there was no way to handle fractional taxes on small purchases. He supported a proposal that the U.S. Mint make fractional denominations of coins, referred to as "baby coins" or "midget money." If that was not an option, he thought the sales tax to be unconstitutional. All this was taking place in the summer before the law was to go into effect in August.
Missouri was not alone. Washington state and Illinois had come up with their own solutions early that summer. Washington made mills for 1 mill and 5 mills, 1/10 of a cent and 5/10 of a cent, respectively. That went into effect on May 21, 1935. The federal government filed suit, charging the state was minting its own coinage. But the governor refused to back down. In June, Illinois did much the same thing, as did New Mexico in July. Missouri was next in line for August.
Secretary of the Treasury Henry Morgenthau didn't approve of states making mills and proposed the federal government add a 1-mill coin and 5-mill coin into circulation. He said it wouldn't be a technical challenge to the Mint. All through July, congressmen and state officials made pronouncements, but to no avail. Adding two more coins into circulation was quietly tabled. States were left to deal with the conundrum on their own.
Milk top mills
Missouri adopted a revised Washington plan. It contracted with a Kansas City bottling company to produce 52 million cardboard mills. The mill was the same size as the cap on a glass milk bottle. That led to its slang names — "milk top" or "beer bottle cap." On the obverse side it stated: "This receipt shows that you are helping to pay for old age pensions, support of public schools, care of poor, insane, and tubercular patients in state hospitals and relief of needy unemployed in the state of Missouri."
If you purchased candy for 10 cents, you paid an additional penny, for which you would receive four 1-mill tokens and a 5-mill token. You could then use those to pay the tax on future purchases. The mills were not redeemable at banks. Merchants collected them to be redeemed by the state auditor's office.
The cardboard coins did not hold up well. That led the Joplin Chamber of Commerce to see its opportunity. It successfully lobbied the state to issue new tokens made of zinc produced by Joplin mines. By July 1937, the state had contracted for 33 million zinc tokens. Sales tax director G.H. Bates wasn't sure that would be enough. In August, the state increased the sales tax to 2% after just two and a half hours of debate. A revised tax schedule was released for small purchases to help customers and merchants.
The zinc tokens held up somewhat better than their cardboard predecessors. However, World War II saw an increased need for all metals. Zinc tokens were retired, and green and red plastic tokens took their place in 1943. By the 1940s, most of the states had begun to retire mills. Missouri was the last state to actively use them. The last set of plastic mills was issued in 1954. Missouri officially ended use of them in 1961.
According to the Utah Numismatic Society, more than 1 billion mills were produced by the 12 states. Most were redeemed, but Missouri's cardboard, zinc and plastic mills can be found for sale online or at coin shows for anyone interested in collecting these pieces of Missouri history.
Bill Caldwell is the retired librarian at The Joplin Globe. If you have a question you’d like him to research, send an email to email@example.com or leave a message at 417-627-7261.