Penny Elimination

Penny Elimination and Sales Tax Guidance

The United States Treasury has stopped minting the penny.  Although the penny remains legal tender, retailers may not be able to provide exact change when customers pay with cash due to shortages of the penny.

Sales Tax Calculation

Retailers must calculate sales tax by multiplying the taxable sales price by the applicable sales tax rate and rounding the amount to the nearest cent by carrying the computation to the third decimal place and rounding up whenever the third decimal exceeds four. The sales tax calculation method remains unchanged regardless of payment type (cash, credit, debit, or other).

No Sales Tax Impact Due to Rounding Cash Transactions

If a customer pays in cash and exact change cannot be provided due to penny shortages, retailers may need to round the total amount due to the nearest nickel. Importantly, this rounding does not alter the sales tax calculation itself.

Links to State Guidance

For links to information prepared by specific states related to this issue, please see the Streamlined Sales Tax (SST) webpage: Penny Elimination. The SST member states recognize this is an evolving issue and will continue to update these links as new information becomes available.

Other Laws May Impact Retailers

Retailers should also be aware that other state and federal laws unrelated to sales tax may impact any rounding policy. It is recommended that retailers consult their legal advisor to determine if their business may be impacted by these other laws.