What does the end of the penny mean for businesses?

In February 2025, President Trump announced that he had directed the Secretary of the Treasury to discontinue minting pennies and as of November 2025, the federal government has stopped producing the penny. Consequently, federal legislation was previously introduced that would require the penny to still be considered legal tender, and all cash transactions to be rounded to the nearest 5 cents. However, nothing has passed at the federal level yet.

Nonetheless, the end of the penny has left many businesses, particularly in the retail space, in need of rounding guidance as exact change becomes more challenging for cash transactions. From a sales tax perspective, generally, retailers are required to calculate and remit sales tax to the exact cent for both cash and non-cash transactions and without the ability to remit exact change; uniform rounding procedures are critical.

Federal guidance

While federal legislation has yet to pass regarding rounding procedures, informal guidance has been issued as the circulation of pennies continues to decrease.

In particular, the U.S. Department of Treasury released a set of FAQs in December to address questions surrounding the penny shortage. The FAQ clarifies that pennies still remain a legal tender, and retailers should continue accepting pennies and providing exact change for cash transactions, while pennies are still available, when able. When considering questions around rounding policies, the FAQ defers guidance to state governments and state taxing authorities. In particular, with regard to the impact on sales tax calculations, the FAQ states “how states and localities will ultimately amend their sales tax laws is the right and responsibility of those jurisdictions.”

For questions around the impact to point-of-sale (POS) systems, the FAQ defers to each individual business on whether it chooses to update its POS system to automatically apply rounding for cash transactions while noting the Treasury Department is actively working with POS system providers “to ensure their systems are properly equipped to handle rounding and accurately calculate sales taxes.”

Ultimately, the FAQ directs businesses that enact rounding policies to do so in a “fair, consistent, and transparent manner.”