The penny was one of the first coins of the federal government authorized under the Coinage Act of 1792 and minted in 1793. The penny ceased to be minted in 2025 (the last order of penny blanks was placed in May 2025, with minting completed in November). Today, there are penny shortages (even though the average life of a penny is 30 years). And there are legal and tax questions about rounding up or down to the nearest nickel now that pennies—while still legal tender—are disappearing.
Some challenges that businesses face as the U.S. becomes penniless
How rounding works
According to the Federal Reserve, rounding is done to the nearest nickel:
“If the final digit of a purchase ends in 3, 4, 8, or 9 cents, the total will be rounded up; if it ends in 1, 2, 6, or 7 cents, it will be rounded down. Transactions ending in 0 or 5 cents are not rounded.”
Customer pricing
It has been a business pricing strategy since 1876 (see the story at the end of this blog) to either charge a whole dollar amount or use an odd number, typically a penny or two less: $9.99 versus $10. This is referred to as odd-even pricing, charm pricing (appealing to the price conscience consumer), and left-digit pricing (the brain thinks $9.99 is within a $9 price range and is considerably less than $10). Without the penny:
- Should prices of goods be changed? Changing the price alone won’t matter if sales tax is involved. For example, a $7 item subject to sales tax of 3% would result in a total of $7.21.
- For those paying cash, should the amount of change be rounded up or down?
What to do: Check state law for rounding rules. For example, Florida recently enacted guidance for retailers:
- If the final total ends in 1 or 2 cents, it must be rounded down to zero.
- If the final total ends in 3 or 4 cents, it must be rounded up to 5 cents.
- If the final total ends in 6 or 7 cents, it must be rounded down to 5 cents.
- If the final total ends in 8 or 9 cents, it must be rounded up to 10 cents.
- Cash transactions ending in 0 or 5 cents are not rounded.
If your state has not given you guidance, use caution in rounding so that you don’t violate state consumer protection laws. For example, rounding down could be considered a descriptive practice. But rounding up is a “rounding tax” on consumers estimated to be about $6 billion. Be sure point-of-sale (POS) systems are updated to reflect your rounding decision.
Cash discrimination
With credit and debit cards, Apple Pay, and other digital options, it’s been an ongoing issue of whether businesses must accept cash payments. Some locations, including Colorado, Massachusetts, New Jersey, and New York, have cash discrimination laws, where businesses must accept cash. Today, most businesses do accept cash payments. Again, the question comes down to rounding up or down when making change.
What to do: Rounding up clearly avoids any legal challenges of shortchanging a consumer. But if you round down for cash customers, is this discriminatory for digital customers? Rounding up for cash customers could be viewed as discriminatory for them.
Refunds
When you issue cash refunds, they must be identical to what the consumer initially paid. (Yes, there can be restocking fees if clearly known at the time of purchase.) This means that if you rounded up when they purchased an item, the exact amount must be refunded.
What to do: Review your refund policy. You can limit cash refunds if clearly posted; you can issue store credit if desired. If you do give cash refunds, again, think about the rounding up or down problem.
Sales taxes
When you charge sales taxes on transactions, you must remit them to the state. In many jurisdictions, the standard rounding rule is carried to the third decimal place. But each state’s sales tax laws are different and can be unclear about rounding up or down.
What to do: If you use a point-of-sale system, determine what it’s doing about rounding. You don’t want to run afoul of state sales tax laws. See Avalara’s article on how the disappearing penny affects sales tax compliance
Final thoughts
On a lighter note, if it used to be “a penny for your thoughts,” what will the cost be now?
The problem of rounding may be solved if a federal bipartisan bill—the Common Cents Act (H.R. 3074; S. 1525) is enacted. The measure was introduced in 2025 but there’s been no action on it since then.
There’s a good history of the penny (with pictures) at the U.S. Mint.
And think…the end of the nickel may be next!
Note: How the penny came into vogue (from Wikipedia). In 1876, Melville Elijah Stone, publisher of the Chicago Daily News (a penny newspaper), convinced local merchants to adopt odd pricing (charging 99 cents instead of $1) so that consumers had pennies to purchase his newspaper. It worked!
