The Disappearing Penny: States Grapple with Rounding Policies

As the U.S. Penny nears extinction, states are scrambling to establish clear guidelines for retailers navigating a cash-transaction landscape without the one-cent coin. The absence of federal direction has led to a patchwork of policies, raising concerns about consumer protection and potential legal challenges.

The Penny’s Demise and the Resulting Shortage

President Donald Trump moved to eliminate the penny in February 2025, citing the high cost of production – approximately 3.7 cents per penny.¹ Even before the final production run in November 2025, retailers and banks were already reporting widespread penny shortages.² The U.S. Treasury estimates that 114 billion pennies remain in circulation, while the Mint estimates 300 billion – a quantity considered far exceeding commercial needs.

State Responses to the Penny Shortage

With no federal guidance forthcoming, states are taking the lead in addressing the issue. Several states are considering or have implemented policies regarding how cash transactions should be rounded.

• New York: Lawmakers have proposed legislation mirroring Canada’s rounding standard – rounding up or down to the nearest five cents.²
• Georgia & Utah: Officials have issued nonbinding guidance to businesses.²
• Indiana: Lawmakers are currently crafting statewide penny-rounding policies, but acknowledge the need for further refinement.¹

Indiana’s Proposed Legislation and Concerns

Indiana’s Senate Bill 243 includes provisions for penny rounding, but the approach has drawn criticism. The bill proposes rounding sales tax down to the nearest nickel, while applying “symmetrical” rounding rules to total transactions – rounding down for totals ending in 1, 2, 6, or 7 cents, and up for totals ending in 3, 4, 8, or 9 cents.¹

The Indiana Retail Council and the Indiana Chamber of Commerce argue that rounding should occur as the final step in a transaction, rather than at the tax calculation stage, to avoid complications with split-tender payments (cash, credit, gift card combinations).¹ This aligns with nonbinding guidance from the U.S. Treasury and the National Conference of State Legislatures.

Potential Economic Impact

The State Budget Agency estimates that Indiana’s proposed round-down approach could result in a loss of between $1.8 million and $3.5 million in annual sales tax revenue.¹ However, this amount is considered “not super material” given the state’s overall sales tax revenue of over $10 billion in fiscal year 2025.

Looking Ahead

As the penny continues to disappear, states will likely continue to refine their rounding policies. Clear and consistent guidance is crucial to ensure fair transactions for consumers and minimize disruption for businesses. The need for employee training and clear communication with customers will also be paramount during this transition.