INDIANA – As the federal government moves toward phasing out the one-cent coin, Indiana is taking proactive steps to ensure Hoosier businesses and consumers aren’t left in a lurch. Governor Mike Braun has signed into law a new provision that establishes clear procedures for how retailers should handle cash transactions in the absence of pennies.
The law, which took effect immediately upon the Governor’s signature, provides a framework for “rounding” that aims to keep checkout lines moving while ensuring the state still gets its fair share of tax revenue.
The Rules of the Rounding
The new legislation isn’t a free-for-all; it comes with specific guardrails to protect both the merchant and the consumer. Here is how the process works:
- Cash Only: Rounding applies exclusively to cash transactions. Payments made via credit card, debit card, or electronic transfer will still be processed to the exact cent.
- Total Price Focus: Rounding is applied only to the final total, including all applicable sales taxes, rather than individual items.
- Merchant Choice: Retailers have the discretion to round either up or down to the nearest five-cent increment (the nickel).
- Tax Integrity: Regardless of whether a total is rounded up or down, the exact amount of tax calculated on the original sale must be remitted to the State of Indiana.
Impact on the Bottom Line
For business owners, the “math” of rounding will be treated as standard business overhead. If a retailer rounds up, the extra cents are recorded as additional income. If they round down, the difference is recorded as a loss.
Example in Action: If a customer’s total comes to $6.42 (including tax):
- Option A (Round Up): The retailer charges $6.45. The 3-cent gain is added to the retailer’s income.
- Option B (Round Down): The retailer charges $6.40. The 2-cent loss is deducted from the retailer’s income.
- The Constant: In both scenarios, the full tax amount (e.g., 42 cents) must be paid to the state.
The provision arrives in response to a growing national penny shortage and the long-discussed federal phaseout of the coin, which currently costs more to mint than its actual face value. By codifying these rules now, Indiana seeks to prevent confusion at the register and provide legal certainty for small businesses across the state.
