This blog was last updated on November 19, 2025
Retail merchants must begin to face the practical reality of President Donald Trump’s order that the U.S. Mint stop producing new pennies. The time is at hand when you will not always be able to make exact change for cash customers. This will undoubtedly lead to at least some customer service challenges, but the bigger issue is whether practical rounding policies for cash sales could run afoul of state and federal rules relating to the mandated equal treatment regardless of the method of payment.
In this environment, targeted state and federal guidance that give merchants a safe harbor would be enormously valuable, but sellers need not wait for new laws or regulations before taking proactive steps to prepare themselves for the inevitable.
The End of Penny Production in the United States
In February 2025, the President announced, via social media, that he ordered the U.S. Treasury to cease production of the penny. According to the post, since a single penny costs more than 4 cents to produce, continuing to mint our smallest denomination of currency is simply wasteful government spending. Following the order, in May 2025 the Treasury ordered its last set of penny blanks.
The final pennies were minted in June and sent to banks in August. Come early 2026, no new pennies will be circulated. While all existing pennies will remain U.S. legal tender, some merchants are already beginning to experience a shortage, and it will only grow worse over time.
In normal circumstances, when retailers need coins to make change, they turn to one of the 165 federal reserve coin terminal facilities. In recent days, however, 60% of these facilities have stopped providing pennies. They simply don’t have them to exchange anymore. It’s in these locations where the penny shortage is the most pronounced. In fact, the Federal Reserve maintains a handy website showing where pennies can no longer be obtained.
Global Precedent Suggests We Can Adjust to a Penniless World
Dropping pennies is by no means unprecedented. New Zealand did it in 1990, Australia in 1992 and Canada in 2012. In each case, there was no massive economic disruption. In Canada, the Government provided clear guidance to businesses on how to deal with the penny’s absence. Cash transactions should be rounded to the nearest five cent increment based upon the final amount payable by the consumer.
Sales tax (GST and PST in Canada) continues to be based on the stated retail selling price and not the rounded price, meaning that any additional money collected due to rounding do not represent additional taxable consideration for sales tax purposes.
The published guidance gives the following example:
Mr. Brown purchases supplies at the local hardware store in Ontario.
| 100 screws @ $1.79 each | $179.00 |
| HST @ 13% | $ 23.27 |
| Total | $202.27 |
| Amount paid | $202.25 (rounded) |
In this case, the total amount paid is rounded down to the nearest five-cent increment after the calculation of HST.
Of course, if this same transaction is conducted with a debit/credit card or other form of electronic payment, the customer pays exactly $202.27.
How Retailers Are Preparing to Get Rid of the Penny
The implications of penny shortages have been widely reported in both the national and local media as retail sellers make decisions addressing their growing inability to make exact change.
- As each of their 900 convenience stores run out of pennies, Kwik Trip will round down to the nearest nickel.
- Kroger is asking all its cash customers to use exact change whenever possible.
- McDonalds is rounding up or down to the nearest nickel at certain locations for cash transactions.
While the Kwik Trip approach of rounding down is certainly the most customer friendly, it’s unclear whether it’s sustainable as the financial impact of always giving out extra change can quickly add up, especially as pennies get more scarce.
Rounding Rules: U.S. Legal Implications
It’s possible that merchants may inadvertently run afoul of state and federal law if they choose to apply different rounding rules to cash versus non-cash transactions. First, several states, including Connecticut, Massachusetts, Maine, and New York have specific statutes restricting sellers from charging credit card customers more than those who pay by cash. For example, Massachusetts statute provides as follows:
No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.
This statute, which was intended to prevent retailers from assessing extra charges to customers using credit cards, could be interpreted as prohibiting a merchant from rounding down cash transactions if the same rounding is not extended to people who pay by credit card. While these laws were not written to target the scenarios presented by the loss of the penny, it’s entirely conceivable that a motivated attorney could attempt to argue for strict enforcement.
The federal challenge is of particular concern to food sellers that accept payments under the Supplemental Nutrition Assistance Program (SNAP). Specifically, the Equal Treatment Rule prevents sellers from treating SNAP recipients differently than other customers. This rule is intended to ensure SNAP recipients receive neither preferred or discriminatory treatment, but since SNAP benefits are provided through a debit card, any store policy which rounds cash transactions differently than debit transactions could be considered a violation.
This is especially true if cash transactions are rounded down but is also technically true if rounded up, since the law requires that benefits be accepted “at the same prices and on the same terms and conditions applicable to cash purchases…”
While no single customer will be significantly aggrieved, retailers have every reason to be concerned about class action lawsuits or qui tam/whistleblower litigation, which allows private citizens to claim that a business is committing fraud against the government.
What Should Governments be Doing?
Federal legislation could certainly help. In fact, such a bill has already been filed. The Common Cents Act, which has been introduced in both the House and the Senate, would clarify the following critical points.
- Formalizes the order to the Secretary of the Treasury to stop minting pennies, except for numismatic purposes.
- Clarifies that pennies are still legitimate U.S. currency.
- Requires sellers to round either up or down to the nearest nickel.
If passed, these measures would give retail merchants a clear path to legitimately rounding all cash sales to the nearest nickel, ending any concerns about legal liability associated with SNAP. Further, the constitutional principle of federal preemption would likely foreclose any legal liability under state law pertaining to cash versus credit sales.
If the Congress is not willing or able to pass the Common Cents Act, the Department of Agriculture could draft a regulation specifying that rounding to the nearest nickel does not violate the Equal Treatment rule.
Since federal law does very little with respect to state and local sales tax, it’s not surprising that the Common Cents Act doesn’t mention the impact of rounding on tax determination and reporting. While no states have offered any official guidance, they would be wise to follow the Canadian example, holding that rounding to the nearest nickel does not change the amount of sales tax due and payable.
What Should Businesses Be Doing Now?
Regardless of whether federal or state guidance is forthcoming, businesses with cash customers need to prepare themselves for a penniless world:
- Plan – Know what you are going to do when the pennies run out and be sure that your POS system can accommodate your chosen approach.
- Communicate – Explain any new rounding rules to your staff and customers. Conspicuous signage near the cash register would certainly help.
- Document – Maintain clear records showing that any rounding approach is applied correctly and consistently to all cash customers.
Final Thoughts on the Penny Retirement
The Federal decision to cease minting pennies, while not unprecedented, creates practical challenges for those businesses with a significant cash-paying customer base. While federal and state legislation would be welcome, it should not be expected. The time is now for forward-thinking companies to adopt compliant strategies that address the inevitable penny shortage. A little advanced preparation will minimize business disruption and the potential for any legal liability.