The Tennessee Department of Revenue issued a notice clarifying how retailers should handle sales tax collection amid the federal government’s cessation of penny production in November 2025. Although pennies remain legal tender, their increasing shortage has prompted some retailers to round cash transaction totals to the nearest nickel (such as to the nearest 5 cents) when providing change. However, the department emphasizes that sales and use tax must continue to be calculated exactly to the cent based on the pre-rounding sales price, in accordance with state law. Retailers are required to remit the precise sales tax amount displayed on the receipt or invoice, regardless of the payment method—meaning the tax due remains identical whether the customer pays with cash, credit card, or other means.

Retailers have flexibility to adopt their own rounding policies for the total cash amount (e.g., rounding up, down, or to the nearest nickel), but any such rounding applies only to the final transaction total after tax has been computed, and it does not affect the sales tax owed or collected. For instance, in one example, a $29.50 item with 9.75% tax yields $2.88 in tax and a $32.38 total; if rounded to $32.40 for cash, the tax remitted stays $2.88. Similarly, a $29.99 item results in $2.92 tax and a $32.91 total; rounding to $32.90 for cash leaves the tax unchanged at $2.92. Tax calculations must still follow the standard rule of computing to the third decimal place and rounding to the nearest cent (up if the third digit is 5 or higher).

This guidance applies solely to Tennessee sales and use tax and does not cover other state or federal laws on rounding. The department notes that the situation may evolve and plans to update the notice if relevant laws change. For additional details, retailers can visit www.tn.gov/revenue or use the Revenue Help resources.