The Penny Is Disappearing; Lawmakers Still Need to Give Their 2 Cents About It

(Source: MIRS.news, Published 12/04/2025) The humble penny is rapidly vanishing from American cash registers, and a new policy brief from the National Conference of State Legislatures (NCSL) warns that lawmakers are running out of time to manage the fallout.

On Feb. 9, the White House directed the U.S. Treasury Department to halt production of the one-cent coin, citing its mounting cost — about 3.7 cents to mint each penny — and rising metal and manufacturing expenses. The U.S. Mint continued striking pennies only until its stock of blanks ran out, with the final regular run occurring last month. Pennies remain legal tender, but no new coins are being made except for limited ceremonial or collector issues.

At the time, federal officials expected more than 114 billion pennies in circulation would be enough to cushion the transition. That assumption has proven overly optimistic. Federal Reserve distribution terminals in cities including Chicago, New York, Dallas, Denver and Seattle have stopped filling penny orders and in many cases are no longer accepting penny deposits. The Fed now says it will supply pennies “as inventory allows,” meaning retailers’ access depends on how quickly local stocks dry up.

In the absence of federal rounding rules, stores are improvising. Some have adopted consumer-friendly policies that always round change up to the nearest nickel. McDonald’s is rounding cash totals up or down to the nearest five cents based on the final amount. Other chains are experimenting with symmetrical rounding or limited-time penny “buyback” promotions that offer customers gift cards worth double the face value of coins they turn in.

The NCSL brief warns that this patchwork of rounding practices — and the lack of clear state or federal rules — risks confusion at the checkout and litigation down the road. While the financial impact of rounding is generally small, the report notes, unclear rules could expose retailers to whistleblower suits for alleged under-collection of sales tax or class actions over overcharges, especially if rounding is applied inconsistently.

Most tax experts agree on one core principle: sales and excise taxes should still be calculated to the cent, exactly as they are today. Under the widely recommended approach, merchants would compute tax on the actual price, round that tax to the nearest penny, and only then round the final cash total — including tax and fees — to the nearest nickel when pennies aren’t available. Electronic payments, checks, gift cards and other non-cash methods would continue to be processed to the cent with no rounding.

Economists say the overall effects on prices and inflation are likely to be minimal if states embrace symmetrical rounding, where totals ending in 1, 2, 6 or 7 cents round down and 3, 4, 8 or 9 round up. Even in scenarios where retailers attempt “strategic pricing” — such as setting prices at $1.98 to nudge totals toward rounding up — the gains are small and tend to disappear on multi-item purchases. And with an estimated 86.9% of U.S. transactions in 2024 made electronically, the universe of purchases affected by rounding is already shrinking.

Experience abroad backs this up. Canada stopped distributing pennies in 2012, applied symmetrical rounding only at the final cash total after tax, and mounted a national campaign to collect and melt down existing coins. A study of Canadian grocery transactions found a modest net benefit to retailers, but the average cost to consumers was under 10 cents per person per year. Several European Union countries, including Finland, Ireland and Italy, now require rounding of cash purchases to eliminate 1- and 2-cent coins from day-to-day use, while still processing electronic payments to the cent.

In the United States, the legal and operational landscape is murkier. The “Common Cents Act” (H.R. 3074) would formally end the penny as a general circulation coin while allowing collectors’ issues to continue, largely codifying current practice. Earlier drafts included a federal rounding mandate, but that provision was stripped before the bill was reported out of committee on Sept. 4, leaving the core policy question unresolved.

Industry groups are urging Congress to fill that gap. In a Sept. 30 letter to key lawmakers, a coalition including the National Retail Federation and National Restaurant Association called the end of penny production an “operational crisis” and pushed for nationwide authorization of rounding cash transactions to the nearest nickel. They warned that at least 10 states and localities currently bar rounding, potentially leaving businesses unable to complete legal cash sales.

Some state and local governments are moving on their own. Utah’s Division of Consumer Protection has issued guidance recommending symmetrical rounding after all taxes are applied, along with printable flyers retailers can post at the register. Barton County, Kansas, meanwhile, is weighing a more aggressive policy that would require all cash transactions to be rounded up to the nearest nickel.

Beyond the checkout counter, the NCSL brief points to broader implications for utilities, medical providers, check cashers, marijuana businesses that operate largely in cash, and low-income or elderly residents who lack access to electronic payment methods. Point-of-sale providers estimate they will need six to nine months to redesign, test and deploy updated systems that can distinguish between cash and non-cash payments and properly record rounding gains and losses.

The report concludes that the core questions now sit with policymakers: whether to seek a national standard or tolerate state-by-state variation; how to protect consumers while keeping litigation risks low; and how to update tax, payment and consumer protection laws for a world where the penny is effectively gone, but is still technically money.