In November the United States minted the last batch of pennies to be put into circulation. The move is an effort to save the federal government about $56 million per year to produce the coin that has become less utilized over the years in actual transactions and is often found in couch cushions, jars, and car cup holders.
Eliminating the penny, however, comes with an impact on state and local sales taxes. It is expected that stores won’t be able to get their hands on the one cent piece as much as they have in the past and thus make it difficult to make change for their customers. Stores now are looking at rounding to nearest five or zero on the final total of a purchase to ensure no pennies are needed. Depending on how they round, that could mean an increase or decrease in sales tax collections for the government.
If stores automatically round up, that will increase the cost of the purchase and lead to an increase in sales tax collections. If the stores round down, that could lead to a decrease in sales tax collections and lead to governments not receiving the expected income they had projected for their budgets, which could lead to tax hikes down the road.
To address the penny elimination, the state of Utah is turning to Europe, where many countries have eliminated their version of the penny, to follow their pattern in handling these transactions. If legislation is passed in the 2026 session, Utah will require stores to adopt the “swedish rounding” method. It works much like how you would expect it to. For totals that end in .01 or .02, the store will round down to .00. If they end in .03 or .04 they will then round up to .05. For .06 or .07, they will round down to .05 and for .08 or .09 they will round up to .10.
For example, if a total is $10.02 then they will round down to $10.00 for the final total. If the total is $10.03 then the store will round up to $10.05.
The rounding will only apply to cash transactions.
The expectation is that as stores round up and round down that it will equal out to be a revenue neutral change or as near close to revenue neutral as possible. National estimates are that about one in five transactions involve cash and coins so any change will likely be a small portion of the total amount collected in sales taxes.
Pennies will continue to be a legal way for making payments, they just won’t be made anymore by the federal government. The United States first minted pennies in 1793. Lincoln was added to the coin in 1909, which was the 100 year anniversary of his birth. As of right now pennies cost four cents to produce which is cheaper than creating nickels which cost about 14 cents to create.