If a South Carolina retailer rounds a cash total because pennies are unavailable, should it recalculate the sales tax using the rounded amount?

Plain-English summary

Rounding a cash total because pennies are unavailable does not change the South Carolina sales tax due. Retailers must calculate, report, and pay sales tax from the item's original sales price, not from the final cash amount after rounding.

The federal government ended penny production on November 12, 2025, although pennies remain legal tender. The Department recognized that shortages can leave retailers unable to make exact change and may lead them to round cash transactions up or down to the nearest nickel. It did not endorse any particular rounding method.

South Carolina imposes a 6% state sales tax on the gross proceeds from retail sales of tangible personal property, with additional local sales taxes in some jurisdictions. Because the tax base is the original sales price, later rounding of the amount collected from a cash customer does not require the retailer to recalculate tax.

The letter's example starts with a $130.89 item. At 6%, the sales tax is $7.85, making the total $138.74. If a customer pays $140 in cash and the retailer rounds the total up to $138.75, the retailer still reports $7.85 of tax. The same result applies if the retailer rounds the total down to $138.70.

Section 12-36-940(C) separately governs rounding fractions of a cent when calculating the tax itself. The letter notes that South Carolina law did not then address rounding the final transaction total because of penny elimination.

What this means for you

Retailers accepting cash

Keep the sales-tax calculation tied to the unrounded selling price. A penny-shortage adjustment to the final cash amount is not a new taxable sales price and should not change the tax reported to the Department.

Point-of-sale and accounting teams

Your system should preserve both figures: the sales tax calculated on the original price and any separate cash-rounding adjustment. Do not let the rounding adjustment automatically recalculate the tax.

Customers

The final cash amount may move up or down when exact change is unavailable, but the tax line should remain based on the original sale.

Common questions

Q: Does the Department require a particular rounding method?
A: No. The letter expressly says the Department is not endorsing a particular method of rounding.

Q: If the total changes by a few cents, does the retailer recalculate sales tax?
A: No. The retailer reports and pays the tax calculated from the original sales price before rounding.

Q: What happens in the Department's $130.89 example?
A: The tax is $7.85 and remains $7.85 whether the $138.74 total is rounded up to $138.75 or down to $138.70.

Q: Is South Carolina's rate always 6%?
A: The state sales-tax rate in the letter is 6%, but it notes that additional local sales taxes can make the combined rate higher.

Citations and references

Authority and statutes:

• S.C. Code Ann. § 12-4-320 (Department's authority to issue advisory opinions)
• SC Revenue Procedure #09-3
• S.C. Code Ann. § 12-36-90 (gross proceeds of sales)
• S.C. Code Ann. § 12-36-910 (sales tax on retail sales of tangible personal property)
• S.C. Code Ann. § 12-36-940(C) (rounding fractional cents when calculating tax)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL26-6.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC INFORMATION LETTER #26-6
SUBJECT:

End of Penny Production
(Sales and Use Tax)

DATE:

January 22, 2026

AUTHORITY:

S.C. Code Ann. Section 12-4-320
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no
precedential value.

Federal Government Ends the Production of the Penny
The federal government ended production of the penny on November 12, 2025. While the
penny remains legal tender, the Department is aware that penny shortages present a
challenge to retailers. Particularly, retailers are having difficulty making change in cash
transactions in which pennies are necessary to provide the correct change to the customer.
As a result, retailers may resort to rounding such transactions up or down or to the nearest
nickel when pennies are not available to make change. The Department is not endorsing a
particular method of rounding but aims to clarify the Department’s position on the impact
of rounding on the amount of sales tax due and payable under such circumstances.
The Impact of Rounding Transactions on Sales Tax Reporting and Payments
South Carolina imposes a 6% 1 sales tax on the gross proceeds of sales of every person
engaged in the business of selling tangible personal property at retail. 2 Retailers are
responsible for collecting, reporting, and paying sales tax to the Department. The amount
of sales tax due is based on the “gross proceeds of sales,” meaning the total amount for
which tangible personal property is sold or purchased. 3 Therefore, the amount of tax due

Some jurisdictions impose additional local sales taxes. Therefore, the sales tax imposed may be higher
than 6%.
2
S.C. Code Ann. § 12-36-910.
3
S.C. Code Ann. § 12-36-90.
1

and payable by the retailer is based on the sales price of the tangible personal property. 4 If
a retailer implements a system of rounding, the sales tax due should not be recalculated
based on the rounded amount. Rather, the sales tax due and payable to the Department
remains the amount calculated based on the original sale before rounding.
Example: A customer purchases an item that costs $130.89. The tax for this item, based
on a 6% tax rate, is $7.85 and the total for the sale with tax is $138.74. The customer pays
the retailer $140.00 in cash. The retailer does not have pennies available to make change
and therefore rounds the transaction up to the nearest nickel to $138.75 and provides $1.25
in change to the customer. The retailer will report and pay $7.85 in sales tax to the
Department and will not adjust the sales tax due based on the rounded total of $138.75.
Similarly, if in the same transaction, the retailer decides to round the total with tax down
to $138.70, the retailer would still report and pay $7.85 in sales tax to the Department and
would not adjust the sale tax due based on the lower amount collected.

State law provides that in calculating the tax due, retailers may round a fraction of more than one-half of a
cent to the next whole cent and a fraction of a cent of one-half or less must be eliminated. S.C. Code Ann.
§ 12-36-940(C). However, state law does not currently address rounding regarding the elimination of the
penny.
4