The End of Penny Production: How Rounding Rules Affect Sales Tax

Updated August 11, 2026

Ending penny production has been debated for decades—but in November 2025, it officially became reality.

The U.S. Mint marked the moment with a ceremony in Philadelphia on November 12, 2025, striking the final one-cent coin and closing a 232-year chapter in U.S. currency. While an estimated 114 billion pennies remain in circulation as legal tender, the long-term trajectory is clear: the penny is being phased out.

And without a one-cent coin in active use, rounding is becoming an operational necessity.

States have already begun responding with new sales tax rounding rules aimed at cash transactions. But for businesses, it creates an important sales tax question: if the final cash total is rounded, does sales tax get rounded, too?

Let’s break down the federal guidance, state-level laws, and what sales tax filers need to do now.

Penny Rounding FAQ

The Federal Baseline: Where Sales Tax Rounding Begins

Before diving into state legislation, let’s start with the federal position.

The U.S. Department of Treasury outlined key guidance in its Penny Production Cessation FAQs issued December 2025. In it, the Treasury confirms that:

• Penny production has ended
• Existing pennies remain legal tender
• Cash transactions may need to be rounded as pennies become less available
• Non-cash transactions are not affected by cash rounding
• Rounding should occur only after taxes and fees are calculated

For this article, that last point is especially important. It suggests that sales tax calculations should still be performed to the exact cent, and that rounding applies only to the final cash total. Non-cash payments remain unchanged and unrounded.

However, there is some important nuance here: this is guidance, not federal law. The Treasury explicitly notes that states may approach the issue differently. And in the world of sales tax, “different” happens all the time.

States Leading the Way on Penny Rounding Laws

With no uniform federal mandate, states are building their own frameworks.

As of August 11, 2026, 20 states have enacted laws addressing cash rounding or related penny-phaseout issues. However, these laws do not all have the same scope. Most apply to general retail transactions, while some are limited primarily to government entities, tax payments, or other specific transactions.

Arizona: Mandatory Swedish Rounding

Arizona was one of the first to enact a mandatory cash-rounding statute, and the approach is highly structured.

Under House Bill 2938, if one-cent coins are unavailable or a seller chooses not to use pennies at the point of sale, the seller must use Swedish rounding on the final transactions amount. The law took effect March 12, 2026.

Key provisions:

• Requires rounding to the nearest $0.05 for cash transactions
• Applies when pennies are not used at the point of sale
• Rounding occurs after all taxes and fees are calculated
• Businesses must post clear signage informing customers

Compliance impact:

Arizona draws a firm line: rounding is a payment adjustment—not a tax adjustment. And it is a requirement. Retailers must ensure their POS systems calculate tax on the pre-rounded amount and apply rounding only at the final step.

Tennessee: Optional Rounding, Exact Tax Required

Tennessee authorizes—but does not require—cash rounding.

Key provisions:

• Non-cash payments are excluded
• Rounding allowed for cash transactions
• Applied to the final transaction total
• Exact tax must still be remitted

Compliance impact:

Tennessee is explicit: rounding is about making change easier—not changing tax liability. Retailers cannot use rounding to inflate or reduce reported sales tax.

Indiana: Rounding Gains and Losses Are Income Adjustments

Although Indiana initially considered requiring rounding, the law which was finalized in March 2026 made it optional.

Key provisions:

• Rounding applies only to cash transactions
• Tax is calculated first
• Businesses may round up or down to the nearest nickel
• Rounding differences are treated as income

Compliance impact:

This is a critical accounting distinction. If you use rounding, the variance belongs in your income statement, not your sales tax reports.

States With Enacted Retail Penny-Rounding Laws

The following table reflects enacted legislation and related tax provisions as of August 11, 2026. Because rounding laws do not all have the same scope, the table only includes states with general retail rounding laws, rather than those only affecting government entities or other tax payment types.

What Sales Tax Filers Should Do Now

If there’s one principle that cuts across nearly every state’s guidance, it’s this: calculate sales tax first, round later (if at all).

Departments of Revenue in states like Texas, North Carolina, Wisconsin, and Utah have all reinforced variations of the same rule:

• Calculate sales tax on the exact sales price
• Any rounding applies only to the final cash total
• Remit the full, unrounded sales tax collected

In other words, rounding belongs at checkout—not on your sales tax return. Just as important is to track the financial impact correctly.

In states like Indiana and Utah, rounding differences are treated as income adjustments, not tax adjustments. That means gains or losses from rounding should flow through your books, not your sales tax payable account

There’s yet another layer that retailers should not overlook, specifically cash discrimination laws.

Cash-Discrimination and Cash-Acceptance Laws

A business may have a state or local obligation concerning the acceptance or treatment of cash that predates the state’s penny-rounding law. In those jurisdictions, simply deciding to round cash transactions may create questions about whether cash-paying customers are being treated differently from customers paying by card or another method.

Some newer laws expressly address this issue. Connecticut’s HB 5349, for example, allows penny rounding coming January 1, 2027, but state guidance has previously indicated that cash discrimination law prohibits rounding up of cash transactions. So until the beginning of 2027 rolls around, cash rounding is decidedly a no-no.

But businesses should not assume that a rounding statute automatically overrides every other applicable cash-acceptance or consumer-protection requirement. Retailers operating in states or local jurisdictions with cash-discrimination, cash-acceptance, price-accuracy, or similar laws should obtain guidance from the applicable state or local department of revenue or other appropriate regulatory authority before implementing a cash-rounding policy.

The Federal Common Cents Act: What’s Next?

The federal government has not yet established a nationwide cash-rounding requirement, but The Common Cents Act has taken an important step in that direction.

The House passed H.R. 3074 on July 14, 2026, which would make cash rounding to the nearest five cents permissive rather than mandatory. It also addresses the continued legal-tender status of pennies and other aspects of the transition.

The bill has not yet been enacted. The Senate companion, S. 1525, remains in committee. But until Congress acts, the practical reality remains a state-by-state system.

Even if a federal bill eventually establishes a national framework, businesses will still need to pay attention to state and local requirements. Overall, sales tax laws are in the hands of individual state governments, but a federal act could help steer penny rounding toward uniformity.

The Bigger Picture: A Mosaic (For Now)

The U.S. penny production stopped, but the U.S. hasn’t stopped being a state-driven sales tax system.

That means:

• No single national rounding rule
• Continued state-by-state laws
• Ongoing legislative and administrative updates

For multi-state retailers, this creates a familiar challenge: compliance isn’t just about knowing the rules—it’s about knowing which rules apply where.

Unless Congress steps in, sales tax rounding rules will continue to evolve at the state level. That makes monitoring changes—and adapting quickly—a core part of staying compliant.

SalesTaxSolutions.US monitors state-level changes so you don’t have to. If you’re managing compliance across multiple jurisdictions, we can help you stay current, consistent, and audit-ready—without getting lost in the patchwork.