The penny is gone — here's what it means for your sales tax calculations

We previously covered Texas’s specific guidance on cash rounding limits and audit exposure. This update broadens the picture — the SST Governing Board has now issued guidance that applies across all SST member states.

The United States Treasury has stopped minting the penny. Pennies remain legal tender, but shortages mean retailers may not always be able to make exact change on cash transactions.

The Streamlined Sales Tax Governing Board has issued guidance confirming that this does not change how sales tax is calculated.

Here’s what sellers need to understand.

What changed

• What happened: The U.S. Treasury has stopped producing the penny. Pennies remain legal tender but are becoming scarce. ^[1]
• Sales tax calculation: Unchanged. Retailers must still calculate sales tax by multiplying the taxable sales price by the applicable rate, carrying the computation to the third decimal place and rounding up whenever the third decimal exceeds four. This applies regardless of payment type — cash, credit, debit, or other.
• Cash rounding: When a customer pays in cash and exact change cannot be provided due to penny shortages, retailers may round the total amount due to the nearest nickel. This rounding applies to the total transaction only — it does not alter the sales tax calculation itself.

The key distinction sellers need to understand

Sales tax is calculated on the sales price before any cash rounding occurs. If the tax on a $4.97 item computes to $0.347, you round that to $0.35 and collect it. If the customer pays cash and you round the total due from $5.32 to $5.30, that rounding is a transaction convenience — it does not change what you owe the state. You still remit based on the calculated tax, not the rounded cash amount.

Who this affects

• Retailers accepting cash payments. If penny shortages make exact change impossible, you may round the total due to the nearest nickel — but your sales tax calculation and remittance are unaffected.
• Ecommerce sellers. If you only accept card payments, penny elimination has no practical impact on your operations.
• Multi-state sellers in SST member states. The SST Governing Board has issued this guidance and is maintaining state-specific links as individual states publish their own penny elimination guidance. ^[2]

What sellers should do right now

• Do not change your sales tax calculation methodology. The calculation rule is unchanged regardless of payment type or penny availability.
• If you accept cash, confirm your POS rounding logic. Cash transaction rounding to the nearest nickel is permissible for the total due — confirm your system is not applying that rounding to the tax line itself.
• Check state-specific guidance. Individual SST member states are publishing their own penny elimination guidance. The SST Governing Board is maintaining a current list at streamlinedsalestax.org/for-businesses/penny-elimination.
• Consult a legal advisor on non-sales-tax rounding rules. The SST guidance covers sales tax only. Other state and federal laws may affect your broader cash rounding policy.

State guidance: 2026 updates

Individual states are now publishing their own penny elimination guidance. Here are the notable updates sellers should be aware of. We will continue to add to this list as new announcements are made.

Maryland (effective May 12, 2026)

Maryland enacted emergency legislation on May 12, 2026 establishing specific rounding rules for cash transactions. ^[3]

The Maryland legislation also amends the definition of “taxable price” to explicitly exclude the rounding amount from the sales tax base. This is the most important compliance point for Maryland sellers: the rounding adjustment is not part of the transaction amount on which sales tax is owed. Calculate sales tax on the pre-rounding price, then apply cash rounding to the total due separately.

Massachusetts (Directive 26-1)

Massachusetts published Directive 26-1 ^[4] confirming that vendors must calculate and remit sales tax based on the exact sales price before any cash rounding occurs. Rounding a transaction up or down to the nearest nickel does not change the sales tax owed. This is consistent with the SST Governing Board position but Massachusetts has now formalized it as official guidance.

If you use TaxCloud: TaxCloud calculates sales tax using the standard rounding methodology required by SST member states. No changes to your TaxCloud setup are needed as a result of penny elimination.