The U.S. penny may finally be on its way out. Producing each coin now costs the U.S. Mint about 3.7 cents, at a total taxpayer cost of more than $100 million per year. Ending production may make economic sense, but it will also have consequences for accountants, retailers and tax administrators who must adapt to a new reality of rounded transactions and potential compliance inconsistencies.
New York's proposed "New Yorkers for Common Cents Act" provides an early look at what could come next. The bill would require merchants to round the final total of any cash transaction to the nearest five cents. Totals ending in one or two cents round down to the nearest nickel, while totals ending in three, four, five, six, seven, eight or nine cents round up. Electronic payments would remain unchanged.
At first glance, this appears to be a simple step to simplify payments. In practice, it raises new questions for sales tax calculation, recordkeeping and reconciliation. When rounding becomes part of every cash transaction, even small differences between cash and card totals can create confusion for customers and complications for accounting teams.
Where currency meets compliance
Under most rounding proposals, sales tax would still be calculated before rounding occurs. Tax rates, formulas and exemptions would not change, but cash totals could differ slightly from those of card or digital transactions. For retailers processing thousands of transactions each day, even small rounding differences can affect financial records, reporting and customer perception.
Other countries have already faced this issue. When Canada eliminated the penny in 2013, it directed businesses to calculate sales tax first and then apply rounding only to the final cash total. That approach helped keep tax math consistent and minimized disputes. The United States could benefit from following a similar model, but early proposals like New York's do not yet address this level of detail.
Having two invoice totals for the same purchase, one for cash and one for digital payment, could create both customer service and consumer protection concerns. Legislators may be able to solve one of those issues but not both, which means retailers will need to develop new rounding procedures that are compliant and customer friendly.
The risk of fragmentation
The greater challenge is what happens if each state takes a different approach. The United States already has more than 13,000 sales and use tax jurisdictions, each with its own rules and reporting requirements, including different economic nexus thresholds. Adding inconsistent rounding practices on top of that complexity would make compliance more complex for multistate retailers.
A national rounding standard would make sense, but reaching agreement among states, local governments and Congress would not be easy. Without coordination, retailers could face an uneven patchwork of rounding rules that create confusion, audit risk and operational errors.
Why this matters to accountants and finance leaders
For accountants and auditors, the elimination of the penny is not a novelty. It is a change that will affect reconciliation, system configuration and compliance reporting. Accounting teams will need to ensure that rounding occurs only after tax calculation, and that records clearly show both pre- and post-rounding totals for audit transparency.
Technology providers will also need to adjust. Point-of-sale systems, ERP platforms and tax engines must include consistent rounding logic across all jurisdictions. Even small inconsistencies between systems could cause mismatched records, reconciliation delays or errors in tax filings.
While digital payments dominate, cash remains an important part of everyday transactions. The Federal Reserve's 2024 consumer payment study found that 83% of Americans used cash at least once in the previous month and that 18% of all in-person transactions were cash-based. That means millions of purchases each day could soon be affected by new rounding requirements.
A call for coordination
Eliminating the penny may reduce waste, but it should not create inefficiency elsewhere. State revenue agencies, retailers and technology providers need to begin coordinating now to establish clear, consistent rounding standards. Businesses should start testing how different rounding models might affect pricing, accounting and sales tax reporting before the changes take effect.
If handled well, retiring the penny can be a smooth transition and even a chance to modernize compliance systems. If handled poorly, it risks adding unnecessary complexity to an already intricate sales tax environment.
