After 230 years, the U.S. Mint struck its final one-cent coin at the Philadelphia Mint on November 12, 2025, closing out penny production for good. The Treasury Department announced the phase-out back in May 2025, citing the rising cost of making a coin that's increasingly expensive to produce relative to its worth. Pennies already in circulation remain legal tender, and a last batch is still working its way into circulation — but the supply will only get thinner from here. For local governments that take cash at a counter, a drop box, or a drive-through window, that raises a practical question with no single settled answer yet: what happens to the penny in your cash drawer?

There's no federal rounding rule — yet

A proposed federal Common Cents Act would create a national safe harbor for rounding cash transactions to the nearest five cents, but as of now it hasn't become law. In the meantime, states are moving on their own: as of March 2026, five states — Arizona, Indiana, New Mexico, Tennessee, and Utah — have enacted their own penny-elimination and rounding laws, and more than 55 similar bills have been introduced elsewhere. The details vary by state, but the general shape is similar: round the final cash total to the nearest nickel, while calculating sales tax on the original, pre-rounding amount so tax revenue isn't affected by the rounding itself.

Yes, this applies to public payments too

It's tempting to think of this as a retail problem, but it isn't only that. Federal law makes U.S. currency legal tender for "all debts, public charges, taxes, and dues" — language that covers utility bills, permit fees, fines, and other payments made directly to a local government. According to guidance from the University of North Carolina School of Government's Coates' Canons blog, when neither a resident nor a local government has pennies on hand to make exact change, adopting a reasonable rounding procedure is a legitimate administrative response — though, notably, it's a policy decision local officials should make deliberately rather than leave to whoever happens to be working the counter that day. A few states, including Ohio and New York, are going further and extending their rounding provisions beyond retail sales to cover tax payments, tolls, and government fees directly.

What this means for your systems

The good news: this only affects cash. Card payments, ACH, and online utility bill pay already settle in exact cents, so nothing changes there. Where it does matter is at any counter, drop box, or kiosk that still takes cash — utility payment windows, permit counters, court and fine payments, parking. A few things are worth doing before pennies actually run out locally:

  • Decide on a rounding policy through an actual board or council action, rather than an informal habit at the counter — and document it somewhere residents can see it.
  • Confirm your point-of-sale and cashiering software can apply rounding to the final cash tender without touching the underlying billed amount or the sales tax basis.
  • Make sure reconciliation reports separate rounding adjustments from the actual amounts owed, so audits stay clean.
  • Watch your state legislature — with 55-plus bills introduced and only a handful enacted so far, the rules in your state may still be moving.

None of this requires a system overhaul. It does require a decision, and a system flexible enough to carry it out cleanly. If you're not sure whether your current setup can handle cash rounding without creating a reconciliation headache, it's worth checking before the question becomes urgent rather than after.