States Begin Addressing Sales Tax Effects of Cessation of Penny Production

In November 2025, the U.S. Mint announced its decision to stop producing pennies and a month later issued frequently asked questions on the topic. The resulting shortage has led retailers to round up or down if they lack the pennies necessary to provide customers with exact change, and many states have begun issuing sales tax guidance on the topic. 

This Alert summarizes state guidance available as of its publication.

Arizona

Gov. Katie Hobbs signed H.B. 2938 on March 12. H.B. 2938 specifies that cash transactions are to be calculated using Swedish rounding, under which, amounts ending in one cent or two, six, or seven cents are rounded down to the nearest multiple of five cents and amounts ending in three, four, eight, or nine cents are rounded up to the nearest multiple. No other form of rounding can be used. 

The state’s sales tax rate is 5.6%, and some cities layer their own sales taxes on top of that. The bill notes that rounding applies to the final amount calculated after taxes, fees, and other charges. It does not provide any examples of that calculation.

Colorado

The Colorado Controller has released guidance specifying that cash transactions ending in one cent or two, six, or seven cents should be rounded down to the nearest amount divisible by five. Amounts ending in three, four, eight, or nine cents are to be rounded up to the nearest amount divisible by five. 

Connecticut

Connecticut’s Department of Consumer Protection has published advice for businesses with cash transactions. The advisory notes that Connecticut is required to accept cash and that cash customers cannot be charged more for using that form of payment. The Department offers two rounding examples and notes that using change jars can assist retailers in making exact change.

Florida

On December 19, the Florida Department of Revenue (DOR) issued Tax Information Publication 25A01 18. Under the guidance, vendors can round the total amount due to the nearest nickel, but only in cash transactions, and they must disclose their rounding policy to customers. Sales tax of 7% must still be calculated and remitted based on the pre rounding price. The guidance provides two examples: one rounding down, the other rounding up.

S.B. 1074 awaits the governor’s signature or passage by default.

Georgia

On December 5, Georgia issued a policy bulletin (SUT 2025 02) stating that rounding is allowed for cash transactions only when pennies are unavailable. Sales tax of 7% must be calculated on the original price before rounding, and rounding can be to the next lowest, next highest, or nearest nickel. The rounded amount does not change the taxable sales price or tax due; the bulletin offers an example to explain that concept.

The legislature has passed H.B. 1112, which awaits Gov. Brian Kemp’s signature. The bill specifies that sales amounts ending in one cent or two, six, or seven cents are to be rounded down to the nearest five cents. Amounts ending in three, four, eight, or nine cents are to be rounded up.

Idaho

Gov.  Brad Little has signed S.B. 1350 to instruct state retailers on rounding rules. Sellers can round either the total transaction amount or the amount of change due to the customer to the nearest multiple of five cents. Amounts ending in one cent or two, six, or seven cents are rounded down; amounts ending in three, four, eight, or nine cents are rounded up.

Sales tax of 6% (or up to 9% depending on local taxes) is calculated on the entire sales price before rounding.

Indiana

On March 5, Gov. Mike Braun signed S.B. 243 as amended by H.B. 1406.  Under S.B. 243, rounding is allowed only for cash transactions and must be on the total price, including tax. Retailers can round up or down, with any resulting gain or loss affecting the retailer’s income. The total 7% sales tax on the transaction, regardless of rounding, must be remitted to the state. 

The next day, the Indiana DOR issued a “For Your Information” notice, which summarizes the penny-rounding rules in S.B. 243 and provides an example of rounding in a cash transaction.

Iowa

Iowa issued minimal administrative guidance on November 12. States sales tax of 6% and varying local rates must be calculated on the pre-rounding taxable sales price. Rounding after computing the tax does not affect amounts due, and returns should report gross sales and tax before rounding.

Under S.F. 2456, cash transaction amounts ending with three, four, eight, or nine cents should be rounded up to the nearest five cents. Amounts ending one cent or two, six, or seven cents should be rounded down to the nearest five cents.

Kentucky

Soon after the U.S. Treasury’s penny cessation announcement, the Kentucky DOR released recommended guidance and sales tax facts. Those documents offer identical information and examples, specifying that any rounding cannot affect the calculation of the state’s 6% rate.   They specify rounding rules to be:

• Down to the nearest nickel for amounts ending in one cent or two, six, or seven cents; and
• Up to the nearest nickel for amounts ending in three, four, eight, or nine cents.

The legislature has passed H.B. 757, which directs retailers to round as follows:

• Amounts ending in one cent or two are rounded down to the nearest 10 cents;
• Amounts ending in three or four cents are rounded up to the nearest five cents;
• Amounts ending in six or seven cents are rounded down to the nearest five cents;
• Amounts ending in eight or nine cents are rounded up to the nearest 10 cents; and
• Amounts ending in zero or five cents remain unchanged.

Maryland

The Maryland General Assembly has submitted S.B. 893 and H.B. 1026 to Gov. Wes Moore for signature. The companion bills specify that the state’s 6% sales and use tax is to be applied to the full price of any cash transaction. Merchants are to round amounts ending in three, four, eight, or nine cents up to the nearest cent divisible by five and amounts ending in one cent or two, six, or seven cents down to the nearest cent divisible by five.

Michigan

Michigan has provided guidance addressing the effects of the penny shortage. The December 8 notice says vendors can round up or down to the nearest nickel in cash transactions based on whether the third decimal place is greater or less than four. 

The guidance also directs retailers to consider how rounding in credit transactions could affect their compliance with the General States Tax Act and Use Tax Act. It notes that because the rounding in those acts applies before the vendor applies any of its own rounding rules, there should be no impact on the calculation of the state’s 6% sales tax.

Nebraska

Gov. Jim Pillen has signed L.B. 838 to advise retailers on rounding in cash transactions. Sales ending in amounts of one cent or two, six, or seven cents should be rounded down to the nearest amount divisible by five. Amounts ending in three, four, eight, or nine cents should be rounded up. Rounding is not to affect the collection of state sales tax of 5.5% (up to a maximum of 7.5% when adding local taxes).

New Jersey

On January 9, the Division of Taxation issued guidance noting that sellers can choose — but are not required — to round transactions up or down to the nearest five cents. Sales tax of 6.625% is due on the full price before rounding. 

If the seller implements rounding, it must “clearly and conspicuously” disclose that practice before charging the buyer.

Companies that round up must account for that additional income when reporting and remitting corporation business tax or gross income tax.

New Mexico

Gov. Michelle Lujan Grisham has signed H.B. 291, which states that the Secretary of Taxation and Revenue has the discretion to allow or require rounding to the nearest whole dollar for amounts due under the Income Tax Act or Corporate Income and Franchise Tax Act. For all other taxes, the secretary can allow or require rounding to the nearest five cents (see a related legislative summary).

North Carolina

On January 22, North Carolina released Sales and Use Tax Directive 26-1 to provide that after-tax rounding — whether up or down — does not affect the amount of sales and use tax due on the transaction for North Carolina sales and use tax purposes. Retailers must calculate sales and use tax at the state’s rate of 6.75% on the sales price of, or gross receipts derived from, taxable sales. The guidance offers two examples: one rounding down and the other rounding up.

Oregon

Gov. Tina Kotek has signed H.B. 4178 to advise retailers on how to round in cash transactions. According to the bill, sellers should round amounts of one cent, two cents, six cents, or seven cents down to the nearest amount divisible by five. Amounts of three, four, eight, or nine cents are to be rounded up to the nearest amount divisible by five. Amounts ending in zero or five cents cannot be rounded. Sellers also must display their rounding rules.

Pennsylvania

Rounding legislation has been introduced in the Pennsylvania house, and the mayor of Philadelphia has released guidance based on DOR input. 

Philadelphia advises taxpayers using cash to pay with exact change, noting that amounts will be rounded up or down the same way most states have advised. Any remaining pennies will not affect a taxpayer’s bill and will instead be wiped from the account. The Philadelphia guidance offers an example and encourages taxpayers to pay online.

South Carolina

South Carolina’s Information Letter 26-6, issued January 22, explains that the amount of sales tax due and payable is based on the sales price of the taxable transaction and is not affected by the penny shortage. Accordingly, if a retailer implements a system of rounding, the sales tax due (the state’s rate is 6%) should not be recalculated based on the rounded amount. Rather, the sales tax due and payable to the state remains the amount calculated based on the original sale before rounding. The guidance’s example explains the sales and use tax consequences of rounding either up or down.

Tennessee

In January, Tennessee issued Notice 26-01 to allow retailers to choose how to round: up or down to the nearest nickel in any transaction or round all transactions up or down to the nearest nickel. Sales tax of 9.75% applies to the full price absent rounding, making the sales tax due the same for cash and card transactions. The notice includes two examples: one rounding up, the other down.

H.B. 1744 became law March 18. It amends Tennessee law to round cash transaction amounts of one cent or two, six, or seven cents down to the nearest five cents and amounts of three, four, eight, or nine cents up to the nearest five cents. 

Texas

Comptroller Memo 202512001M, issued December 1, specifies that sales tax of 8.25% must be calculated on the actual sales price. Rounding to the nearest nickel is acceptable if consistently applied, but excessive rounding (such as to the nearest dollar) is treated as additional sales price and becomes taxable. The memo includes four examples and states that noncash transactions should not be rounded but instead charged to the exact penny.

The legislature is not in session in 2026, so no legislation is expected absent a special session.

Utah

In November 2025, the state’s Division of Consumer Protection issued nonbinding administrative guidance on how retailers should handle cash rounding in the absence of pennies. Cash transactions ending in: 

• One cent or two should be rounded to zero;
• Three or four cents should be rounded to five cents;
• Six or seven cents should be rounded down to five cents; and
• Eight or nine cents should be rounded to 10 cents.

Businesses must “clearly and conspicuously” disclose their rounding methods.

Taxes are to be calculated on the entire transaction, with rounding occurring after sales tax has been applied to the sales price. The general rate is 4.85%, but local taxes can bring that rate up to 8.7%. Unprepared food is taxed at a reduced rate of 3%.

While the business advisory is only interim, taxpayers can rely on it until the legislature provides final clarity.

Virginia

Gov. Glenn Youngkin has signed H.B. 954 to inform retailers of the state’s rounding policy following national cessation of penny production. All transactions must be taxed on the original purchase price at the state rate of 5.3%. The rounding is either up or down to the nearest five cents based on the transaction’s final amount. Purchases ending in three, four, eight, or nine cents are to be rounded up; those ending in one cent or two, three, six, or seven cents should be rounded down.

Washington

On February 26, the DOR issued interim penny-rounding guidance. The guidance allows sellers to choose a rounding procedure, with sales tax of 8.4% due on the entire price before rounding. 

The guidance explains that rounding could affect a company’s gross income subject to the state’s business and occupation (B&O) tax and provides examples. Because of the unique situation created by the elimination of the penny, the Department will not enforce B&O liability on gains from rounding until it issues final guidance.

Wisconsin

On December 1, the DOR provided information regarding how the cessation of penny production will affect property tax bills, stating that those bills cannot be rounded up or down. The DOR notes that property taxes must be paid in full but is aware that some local governments require exact change for cash transactions. It advises municipalities and counties to seek legal counsel in developing any related policies.

On March 10, the DOR issued guidance (Doc. No. 100324) to advise retailers on how the penny shortage affects the sales and use taxation of cash transactions. The shortage is not to affect the calculation of the state’s 5.5% sales and use tax rate, and the guidance offers one example of how retailers should round taxable amounts. The DOR has requested comments on that guidance.

Other Updates

Three pieces of Mississippi legislation died in committee, and bills proposed in Kansas, West Virginia, and Wyoming failed.

Montana, Nevada, North Dakota, and Texas are not in session in 2026.

The National Retail Federation has called for federal action to provide a uniform system of addressing the penny shortage and the resulting rounding of transactions. While bills (S. 1525 and H.R. 3074) have been introduced in the U.S. Congress, they have not been enacted.

The Streamlined Sales Tax Governing Board has posted only limited general information on the topic.