Texas Comptroller Issues Guidance on Sales Tax and Cash Rounding as the Penny Is Phased Out
With the federal government officially ending production of the penny in 2025, states are beginning to adjust their tax administration practices. The Texas Comptroller of Public Accounts has released 202512001M, Tex. Comptroller of Public Accounts (12/1/25) outlining how the state will handle cash payments and sales tax calculations as pennies become scarce.
This guidance is especially important for Texas retailers, restaurants, service providers, and any business that accepts cash payments for taxable transactions.
Why Texas Issued New Guidance
The federal phase‑out of the penny is expected to create coin shortages between late 2025 and early 2026. Because many cash transactions rely on pennies to make exact change, the Comptroller has clarified how rounding should work—both for payments made to the state and for payments made to retailers who must collect and remit sales tax.
Texas is using its authority under Tax Code §111.002 to adopt rules that reflect changes in federal law affecting tax collection.
How Texas Will Handle Cash Payments Made to the State
The Comptroller’s offices will:
1. Continue accepting pennies
As long as pennies remain legal tender, taxpayers may use them for exact‑change payments.
2. Continue giving pennies as change—when available
If an office has pennies on hand, it will make change normally.
3. Round down when pennies are unavailable
If a taxpayer cannot provide exact change and the office has no pennies, the total due will be rounded down to the next lowest nickel and accepted as payment in full.
4. Apply rounding only to cash payments
Electronic payments, checks, and other non‑cash methods will continue to be processed to the penny.
How Retailers Should Handle Sales Tax on Cash Transactions
Texas law requires that sales tax be calculated exactly, using the statutory rounding rules in:
These rules require retailers to:
Calculate tax on the total sales price
Round fractions of a cent up when ≥ $0.005
Round fractions down when < $0.005
This calculation does NOT change because of the penny shortage.
Retailers must still compute and remit the correct tax amount—even if the final cash total is rounded.
Texas Allows Rounding to the Nearest Nickel—With Limits
If the total amount due (sales price + tax) cannot be collected without pennies, retailers may:
Round down to the next lowest nickel
Round up to the next highest nickel
Round to the nearest nickel
The Comptroller will not adjust the sales price or recalculate tax due when rounding stays within these boundaries.
However:
If a retailer rounds beyond the nearest nickel—such as rounding up to the next dollar—the Comptroller will adjust the sales price and tax due accordingly.
Examples from the Comptroller’s Memo
Using a taxable item priced at $299.99 with an 8.25% tax rate:
Tax due: $24.75
Total: $324.74
Allowed rounding:
Accepting $324.70 (round down)
Accepting $324.75 (round up)
Accepting $324.75 (nearest nickel)
In all cases, the retailer still remits $24.75 in tax.
Not allowed:
Accepting $325.00 (rounding to the next dollar)
In this case, the Comptroller will adjust the sales price upward and recalculate tax, increasing the tax due.
Recordkeeping Requirements
Retailers must maintain sufficient documentation to support any rounding applied to cash transactions. This includes:
POS system records
Receipts
Transaction logs
Policies showing rounding practices
These records are essential for audit purposes.
What Businesses Operating in Texas Should Do Now
To stay compliant, businesses should:
1. Review POS systems
Ensure tax is calculated before rounding.
2. Establish a rounding policy
Choose whether to round up, down, or to the nearest nickel.
3. Train staff
Cashiers should understand when and how to apply rounding.
4. Maintain strong records
Documentation is key for audit protection.
5. Monitor future rule changes
Texas plans to amend Rule 3.13 and potentially other rules to incorporate this guidance.
Final Thoughts
Texas’ approach mirrors other jurisdictions that have eliminated the penny: tax calculations remain unchanged, but cash totals may be rounded to the nearest nickel.