Phasing out the penny: Preparing for a currency shift without clear rules

What happened? 

At the Streamlined Sales Tax Governing Board meeting held on May 21, 2025, US Treasury Department Assistant Secretary John York shared plans to discontinue penny production due to rising costs and declining utility. While this announcement signals a significant shift in US currency policy, it is important to note that there is no enacted federal legislation, nor published regulations, to adopt the change. A shortage of pennies in circulation is expected potentially by early 2026. 

The elimination of the penny introduces uncertainty into pricing approaches, consumer transactions, legal compliance, and, in particular, sales tax calculations. While it is assumed that cash transactions would be rounded to the nearest five cents, no rounding rule to accommodate the elimination of the penny has been adopted by a government body. Additionally, the perspectives of state regulators, the potential for legislative responses, and the stance of consumer protection agencies remain unclear. The absence of uniform direction may cause inconsistency in customer experience, sales tax compliance, and commerce practices. Notably, states currently only round to the penny, and there is no provision for rounding to the nickel at either the item or invoice level.

Businesses, tax authorities, and software providers should begin internal planning and identify potential points of impact. Retailers, in particular, should assess how pricing, point-of-sale (POS) systems, and reconciliation procedures may need to be adapted for sales tax calculation, collection, and reporting, and whether rounding at the item or invoice level can be accommodated in jurisdictions where sales tax applies. In addition, retailers should evaluate system capabilities, customer experience implications, general ledger integrity, and historical reporting challenges. They also should monitor federal and state responses due to the current legal ambiguity.