Background
On November 12, 2025, the last penny was minted at the U.S. Mint in Philadelphia. The U.S. Secretary of the Treasury exercised authority under 31 United States Code (USC), Section 5111(a) and §5112 to suspend production.
The decision to cease penny production was largely rooted in cost. According to the U.S. Mint, total production cost of the penny has risen from 1.42 cents to 3.69 cents per penny over the past 10 years. The U.S. Mint predicts the discontinuation of the penny will result in annual savings of $56 million. New pennies will no longer be manufactured, but according to the U.S. Department of the Treasury (Treasury), there are around 114 billion existing pennies in circulation. While the penny remains legal tender and may still be used for transactions, it is anticipated that the stoppage in production will reduce, and eventually eliminate, pennies in circulation.
Federal Considerations
The Federal Reserve is responsible for distributing coins to banks and credit unions. The Federal Reserve will still accept deposits of pennies from banks and credit unions; however, it indicates that the coin distribution locations accepting deposits will vary over time. Coin distribution locations will cease fulfilling penny orders when inventory is depleted.1 This will impact cash transactions, and it will be necessary to “round” such transactions in the absence of penny availability.
Currently, there are no federal “rounding” guidelines.
On July 23, 2025, the Common Cents Act passed out of the House Committee on Financial Services on a bipartisan basis. The act proposes the following rounding practices for cash transactions only:
- If the price ends in $0.01, $0.02, $0.06, or $0.07, round down to nearest $0.05.
- If the price ends in $0.03, $0.04, $0.08, or $0.09, round up to nearest $0.05.
- If the price is exactly $0.01 or $0.02, round up to $0.05.2
However, further consideration is required before the act can be advanced for floor votes.3
In the meantime, Treasury recognizes that “states will approach this issue differently based on unique considerations” and indicates “businesses should apply rounding practices in a fair, consistent, and transparent manner.”
Business Impacts
While the penny still remains legal tender, businesses are expected to choose between several options to reflect this change: choosing to round cash transactions to the nearest nickel, requiring exact change (though the ability to do this will be limited as fewer pennies are in circulation), or using credit card or digital transactions.
The cessation of penny production, and the resulting decrease of the number of pennies in circulation, has implications for cash transactions for retailers selling taxable products. Several states have addressed the implications of this for sales and use tax purposes, as described in the following section. In addition to the various administrative pronouncements, several states, including Arizona, Florida, Missouri, and Nebraska, have pending legislation to address these issues.
Specific State Guidance
Michigan
Michigan issued a notice on December 8, 2025, providing guidance on rounding up or down to the nearest nickel. Mich. Comp. Laws §205.73(2) and Mich. Comp. Laws §205.107 provide that retailers “… shall compute the tax to the third decimal place and round up to a whole cent when the third decimal place is greater than 4 or round down to a whole cent when the third decimal place is 4 or less.”
The Michigan notice provides that rounding should be applied after sales and use taxes are calculated. Regardless of rounding, the sales or the use tax should be based on the listed price to the nearest cent. A seller that chooses to round down to the nearest nickel would have to absorb the incremental cost, but sellers who choose to round up to the nearest nickel would not be unjustly enriching themselves. Sellers must maintain adequate records to support their methodologies for audit purposes. The notice also recommends itemizing any amount collected separately due to rounding on a customer’s bill, receipt, or invoice.
Texas
Texas issued guidance, STAR Accession No. 202512001M, on December 1, 2025, to address the penny shortage for cash payments. Retailers must calculate the sales tax based on the sales price of the taxable item. Rounding should be applied after sales price plus the sale tax to the nearest nickel, and so long as the rounding convention only moves toward a five-cent increment, the sales price will not be adjusted.
Utah
The Utah Division of Consumer Protection issued guidance on November 10, 2025, to address the penny shortage. While the guidance noted that businesses can choose their own rounding methodologies, the notice recommended the following:
- If the price ends in $0.01 or $0.02, round down to $0.00.
- If the price ends in $0.03 or $0.04, round up to $0.05.
- If the price ends in $0.06 or $0.07, round down to $0.05.
- If the price ends in $0.08 or $0.09, round up to $0.10.
Tax should be calculated and remitted regardless of rounding. Disclosure of the rounding method must be made clearly and conspicuously, and the guidance includes a proposed flyer to be posted at points of sale. By its terms, rounding only applies to cash transactions.
Florida
Florida issued guidance on December 19, 2025, Tax Information Publication 25A01-18, addressing cash transactions considering the stoppage of penny production. Regardless of payment method, all the Florida sales tax and any applicable sales surtax (local sales tax) must be calculated pursuant to current law. If the total amount cannot be collected due to the penny shortage, retailers are allowed to choose its method of rounding so long as it discloses the methodology to the customer. Tax is computed to the nearest penny regardless of the rounding methodology.
Forvis Mazars Insight: These notices result in disparate treatment for cash customers as opposed to those paying by electronic means or by credit card. This treatment may create problems under federal and state constitutional principles.
How Forvis Mazars Can Help
Forvis Mazars can help sellers understand the impact that the penny shortage will have upon your collection and remittance responsibilities as a vendor and help you develop policies to address any individual state issues that arise out of the penny shortage. Furthermore, we can collaborate with you to consider and, as needed, implement the systematic changes necessary to address the penny shortage issue by state, i.e., address systems such as your ERP system, ecommerce and/or billing system, and tax engine.
In addition, financial institutions should consult with local counsel for state guidelines and requirements and establish clear policies and procedures for handling the penny shortage in connection with customer transactions.
Do you want to learn more about regulatory changes and the impact on your operations? Join ProBank Education Services April 20–23, 2026 for our 2026 Spring Regulatory Compliance Conference in Lexington, Kentucky. Our four-day conference will navigate shifts in the regulatory landscape and focus on the latest in deposits, BSA, and lending compliance, mixed with essential leadership topics.