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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.
Footnote
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."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
