re: Was I in the wrong here? Is a counter not where you put money?

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Never heard that.

Why is it called a Counter then?

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While I admit to being raised by two Emily Post-esque parents who had etiquette for every possible human interaction my secretary just happened to pop in and I ask her "Is it OK to place your money on the counter when paying in a store?". Her response was "If you wanna be an a-hole."

It may be a regional thing but a quick Goggle search shows the opinion seems to be widespread.

As for the etymology of the word "counter" and how it relates to a specific interaction I would just say relying on lexicology to guide your daily personal interactions is likely to cause you to run afoul of convention as often as not.