The Penny Is Going Away — Here’s How Your Cash Register (and Your Sales Tax) Should Handle It
Treasury stopped minting pennies in 2026. Washington and other states now have cash-rounding rules. What businesses that take cash need to do.
The U.S. Treasury stopped producing new pennies in 2026, and the coins are already getting scarce at the register. For any business that takes cash, that raises a practical question with a surprisingly technical answer: when you can’t make exact change, how do you round — and what happens to the sales tax? Washington’s Department of Revenue and a growing list of states have now spelled out the rules, and getting them wrong creates a real compliance gap.
After President Trump directed Treasury to halt penny production, minting wound down in early 2026, according to MultiState. As pennies disappear from circulation, retailers can no longer reliably give exact change on cash sales — so the practice of rounding the final cash total to the nearest five cents is becoming standard. Major chains moved early; McDonald’s began rounding cash transactions to the nearest nickel back in November 2025.
The catch is that rounding is being handled by state law and revenue-agency guidance, not a single federal rule. As of spring 2026, several states — including Arizona, Indiana, New Mexico, Tennessee, and Utah — had enacted price-rounding frameworks. Here in Washington, the Department of Revenue issued interim guidance effective February 26, 2026.
Two points from that WA guidance matter most:
You have flexibility on the rounding method. The DOR lets retailers “round up or down to the nearest nickel, round all transactions up to the nearest nickel, or round all transactions down to the nearest nickel,” per the Washington Department of Revenue.
Sales tax is calculated before rounding. The DOR is explicit that “sales tax remains due on the sales price prior to the retailer applying rounding due to the lack of pennies.” Rounding is a cash-payment convenience applied to the final total — not a change to the taxable sale price.
The rounding only applies to cash transactions, where exact change isn’t possible. Card, check, and digital payments settle to the exact cent as usual.
Why it matters
This is a small mechanical change with a compliance trap baked in. If your point-of-sale system rounds the total and then calculates sales tax on the rounded figure, you’re computing tax on the wrong base — and doing it on every cash sale, all day. Across a busy retail or restaurant operation, that adds up to a systematic error in what you remit to the state.
Washington’s guidance is also still interim — the DOR has flagged pending legislation (SHB 2089) that may affect the B&O tax treatment of gains or losses from rounding, and said it won’t enforce B&O tax on rounding gains on a prospective basis while that shakes out. In other words, the rules are settling in real time, and the final version may change.
“Sales tax remains due on the sales price prior to the retailer applying rounding due to the lack of pennies.” — Washington Department of Revenue interim guidance
What this means for your business
If you take cash, this is worth 20 minutes with whoever manages your register and your books:
Check the tax-calculation order in your POS. Sales tax must be figured on the original, pre-rounding price. Confirm your system rounds the final cash total, not the taxable amount. This is the single most important setting to verify.
Pick a consistent rounding method and document it. Washington lets you round up, down, or to the nearest nickel — but pick one and apply it uniformly. Rounding every transaction up is allowed, but customers notice, so most businesses use nearest-nickel.
Leave card and digital sales alone. Those still settle to the exact cent; only cash payments round.
Expect the penny rounding to net out — but track it. Over many transactions, nearest-nickel rounding roughly washes out. Small gains or losses can still show up in your cash-over/short account, and Washington’s B&O treatment of those amounts is still being finalized.
If you operate in more than one state, don’t assume the rules match. Each state is writing its own framework. What’s fine in Washington may differ across the border.
This is general information, not tax or legal advice. Washington’s guidance is interim and subject to change as legislation is finalized.
The bottom line
Losing the penny sounds trivial, but it touches the two things a cash business can’t afford to get wrong: the register and the sales-tax remittance. The fix is simple — round the final cash total, tax the original price — but it has to be set correctly in your POS before it quietly compounds across thousands of transactions. A quick check now beats reconciling a sales-tax discrepancy later.
