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Impact of the Suspension of Penny Production on Sales and Use Tax in North Carolina: What Retailers Need to Know

On November 12, 2025, the United States Mint announced that it will no longer produce pennies for circulation. In response, the North Carolina Department of Revenue (NCDOR) issued Sales and Use Tax Directive 26-1 to advise retailers on how rounding in cash transactions may affect sale and use tax calculations, and outline important record-keeping practices.

With pennies effectively out of circulation, many retailers in North Carolina are choosing to round cash totals after tax, either up or down to the nearest nickel. The Department pointed out two main approaches:

• Symmetrical rounding up or down to the nearest five cents; and
• Always rounding down to the nearest five cents.

Sales and use tax is calculated on the “sales price”[1] before any rounding occurs. Rounding affects only the cash exchanged, not the taxable amount.

What This Means for Your Business

Here’s what retailers need to know about the impact of rounding on their tax collection practices:

• Rounding on cash transactions doesn’t change the amount of tax due.
  • Retailers must calculate sales and use tax on the actual sales price or gross receipts, before rounding any cash transaction.
• Calculations for determining sales and use tax have not changed.
  • NCDOR still requires that sales and use tax be computed to the third decimal place on the final sales price and then rounded to the nearest cent before reporting and remittance.
  • Retailers can choose to compute the tax per item or invoice, and then the rounding applies to the aggregate tax due.
• Accurate record-keeping is essential.
  • North Carolina law requires taxpayers to keep documentation showing how their sales and use tax liability is determined.
  • For businesses that round cash transactions, this means:
    • Updating point-of-sale systems to capture rounding details on receipts;
    • Keeping internal records that clearly show how cash totals were rounded after tax; and
    • Ensuring the rounding practices are traceable if reviewed by auditors.
• Rounding does not apply to non-cash payments.
  • Purchases paid with non-cash methods such as credit or debit cards, electronic payments, gift cards, and check checks aren’t subject to these rounding rules.

[1]Under N.C.G.S. § 105-164.3, “‘sales price’ is the total amount or consideration for which an item is sold, leased or rented.”

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Young Moore and Henderson lawyers can help you analyze whether your North Carolina tax collection practices match the Department’s new guidance, and they can assist you with your other North Carolina state and local tax obligations. For assistance, please contact Reed Hollander or Marlo Donato Kalb.

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About Young Moore and Henderson, P.A.

Young Moore and Henderson, P.A. is a Raleigh-based civil law firm of about 40 attorneys. We advise and defend national and regional companies on North Carolina matters and assist individuals and families with estate planning, wealth preservation, and estate litigation. Our attorneys serve clients across a wide range of practice areas, including administrative law, appellate, business, commercial disputes, construction, employment, healthcare, insurance, state and local tax controversy, transportation, trusts and estates, and workers’ compensation. As a member of ALFA International, we connect clients with trusted counsel across the United States and around the world when matters extend beyond North Carolina.