Photo by James Sanna | Banker& Tradesman Staff / File

There are an estimated 114 billion U.S. one-cent coins in circulation. But with no more to be minted, businesses and state government are starting to scramble for solutions to a potential penny shortage.

The U.S. Treasury Department ceased production of the penny last year after it determined making more of the coins would not be “fiscally responsible or necessary to meet the needs of commerce in the United States” especially given “the increasing number of non-cash transactions and the very low purchasing power of a single penny.” When the last ones were made in November, it cost 3.69 cents to manufacture one penny, the Treasury said.

Since then, shortages of the coin have led some Federal Reserve regions to stop supplying and accepting pennies. With the universe of pennies now capped, some retailers have taken lengths to, essentially, buy pennies from customers using programs that convert rolled coins into gift cards. Others, like Dunkin’, have policies that round a customer’s change up to the nearest nickel so the retailer doesn’t have to dole out the one-cent pieces.

Consumer Protection Committee Chairman Tackey Chan said the disjointed response from businesses and consumers to the end of the penny is an example of “what happens when you don’t use a deliberative process to make a decision” and noted that other countries like Canada phased out one-cent coins over a period of years. Without a uniform, national plan, he said, the varied reactions show “the value of the penny in our local economy.”

“It looks like a minor issue, but it isn’t a minor issue,” Chan said. He added, “The penny matters these days. Obviously we’re living in an inflationary period but … every penny does matter when were in a K-shaped economy.”

Chan said roughly 20 percent of the U.S. population is “underbanked” or has insufficient access to a bank and noted that others simply feel safer operating in cash. Last month, he filed a bill (HD 5559) that seeks to simplify things for people who pay with cash and eliminate a situation in which each retailer pinches pennies differently by setting a standard set of rounding rules for cash transactions across Massachusetts businesses.

If the total transaction amount (including all taxes and fees) ends with 1 cent, 2 cents, 6 cents or 7 cents as the final digit, it would be rounded down to the nearest number divisible by five. If the total transaction amount ends with 3 cents, 4 cents, 8 cents or 9 cents as the final digit, the amount would be rounded up to the next number divisible by five.

So if a transaction totaled $4.32, it would be rounded down and the customer would pay $4.30. But if the transaction total was $4.38, it would be rounded up and the customer would pay $4.40. Retailers could also round minuscule transaction totals of $0.01 and $0.02 up to $0.05.

Rounding rules would not apply to payments made electronically, or with checks, gift cards, or other non-cash methods. Chan’s bill also charges the Office of Consumer Affairs and Business Regulation with writing the rules around fair notice to shoppers. It is before the House Committee on Rules as it awaits referral to another committee.

“When we look at other countries, it’s a slow process and retailers eventually move to [prices ending with] 0 and 5, so no longer 99 cents or 97 cents,” Chan said.

The system Chan’s bill envisions mirrors what the National Conference of State Legislatures called the “most recommended” way to deal with the point-of-sale headaches created by the penny’s demise. The NCSL said 60.7 percent of prices in 2025 ended with .99, 28.6 percent ended with .05, and 7.5 percent were a whole-dollar amount.

It is widely agreed that rounding practices should be consistent nationwide, fair to consumers, retailers and state tax revenue collection, and respect the autonomy of individual jurisdictions. To avoid unnecessary disruption and maintain administrative simplicity, most experts recommend that sales and excise taxes continue to be calculated and rounded to the nearest penny, as is current practice,” NCSL said in a brief it published in November. “The principal change would occur at the point of payment: for cash transactions, the total amount due, including all taxes and fees, will be rounded to the nearest nickel, ensuring compatibility with available currency.”

The organization said the additional 1 or 2 cents a retailer collects from a rounded-up transactions would not affect the amount of sales tax due and would be treated as additional income for the seller. When a transaction total is rounded down, the 1- or 2-cent difference would be considered a loss for the seller’s income tax purposes, NCSL said. Those gains and loses, the group said, are expected to offset over time “ultimately resulting in little to no net financial impact.”

States have “largely refrained from legislating or issuing new regulations around how and at what point currency rounding decisions should occur,” NCSL noted in the fall. The group said the impacts of rounding are “likely to have limited impacts on state revenue, retailers, and consumers,” but said the lack of a standardized regulatory environment carries “significant legal risks and may additionally create confusion among stakeholders.”

Attempting to clear up any confusion for municipalities, the Department of Revenue’s Division of Local Services last month issued guidance to cities and towns that might run into penny shortages.