The Cash Cost of Eliminating the Penny

The penny is gone, but the cent is not. Credit cards, debit cards, and digital wallets still settle to one-hundredth of a dollar. But many national retailers, grocery chains, and quick-service operators still process hundreds of millions of cash transactions a year.

Since the US minted its last penny in November 2025, the supply of pennies has been dwindling — and no one has told merchants what to do when it runs out. For companies still processing high volumes of cash, the choice of how to round is a P&L decision, a regulatory question, and a customer relations risk.

The Canada Solution

A penny is trivial. Multiplied by several hundred million transactions a year, it is not. A merchant that rounds down every time will absorb millions in losses. Round up, and it could face regulatory scrutiny and the reputational cost of nickel-and-diming customers.

Canada eliminated its penny in 2012. Unlike the US, it provided a clear, uniform framework for rounding. Prices are still calculated in one-cent increments. Rounding is applied once to the final total after tax, and only on cash transactions. The rule is symmetrical: totals ending in 1 or 2 round down; 3 or 4 round up; 6 or 7 round down; 8 or 9 round up. Totals ending in 0 or 5 stay where they are.

Because gains and losses are symmetrical around the midpoint of each five-cent band, they wash out over high transaction volumes. Neither merchants nor customers are systematically advantaged. That neutrality is why the model has broad US endorsement: the Taxation Task Force of the National Conference of State Legislatures; the Utah Department of Commerce; proposed legislation in New York, Oklahoma, Washington, and West Virginia; and the Treasury’s own FAQ all point the same direction. The bipartisan Common Cents Act would codify it nationally, but it has not yet cleared Congress. Until it does, the Canada model is the most defensible basis for merchant action.

The Compliance Challenge

The Canada model answers the rounding question. It does not answer the legal one. In at least 10 states and localities, rounding cash transactions may already be prohibited — meaning a merchant that adopts the most widely endorsed framework in the country could still be violating local law. Merchants accepting SNAP benefits face federal equal-treatment rules triggered by any practice that treats cash and card customers differently. Visa and Mastercard require equivalent treatment of cash and card; the application of those rules to rounding is unsettled. And state unfair, deceptive, and abusive practice (UDAP) statutes mean a practice lawful in one state may be deceptive pricing in the next.

That is the real problem: not which rounding method to choose, but whether the legal infrastructure in each jurisdiction permits you to implement it.

What to Do Now

Until Congress or federal agencies act, merchants need an approach that is defensible across jurisdictions, consistent across stores, and clear to the customer standing at the register. Here is where to start:

• Set a company-wide policy. Handle rounding at the enterprise level, not store by store. Consistency helps to reduce legal exposure and simplifies training and POS configuration.
• Adopt symmetrical rounding. The Canada model is the most broadly endorsed framework and could provide a defensible basis for action in the absence of binding rules.
• Round once at the end. Apply rounding to the total due after all taxes, fees, and discounts — never item by item.
• Limit rounding to cash. Electronic payments should continue to be processed to the exact cent.
• Honor exact change. If the customer tenders exact change or if pennies are available, settle at the precise amount. Pennies remain legal tender.
• Remit taxes on the prerounded amount. Tax obligations are calculated before rounding and must be remitted as required by law.
• Disclose clearly. Post your rounding methodology at registers and entrances. Clear disclosure is both a UDAP risk-mitigation measure and a customer relations baseline.
• Keep records. Document your policy and how it appears on customer receipts to support consistent practices and withstand regulatory scrutiny.
• Train before you launch. Update POS systems and train staff before implementation. Inconsistent application at the register undermines the legal protections a well-designed policy is meant to provide.

Companies that adopt the Canada model — the one most likely to align with whatever federal standard eventually arrives — with clear disclosure and consistent implementation could mitigate regulatory risks.