Sales tax and cash rounding

Compute sales tax on the real price, round only the cash total, and remit the exact tax. Every state that has addressed it says the same.

Updated October 30, 2026 · Based on official sources listed below

The order of operations

Add up the items and apply discounts.
Compute sales tax on that price, to the cent, using your state’s normal method.
Add tax and any fees to get the exact total. This is what goes on the receipt and in your sales records.
If the customer pays cash, round that final total to the nearest 5¢ (or round the change, where the state allows).
Remit the tax from step 2. The rounding difference is not tax.

Worked example

Items	$3.49 + $2.99 + $0.89 = $7.37
Sales tax at 6%	$0.4422 → $0.44
Exact total	$7.81
Cash collected (ends in 1, rounds down)	$7.80
Tax you remit	$0.44
Rounding adjustment	−$0.01

Try your own numbers in the calculator using “Item prices + tax rate”.

Recording the rounding difference

On the receipt: show the exact total, then a separate rounding line (for example “Cash rounding −$0.01”) and the amount paid. Colorado’s Department of Revenue says the rounding adjustment must be shown as a separate charge, and North Carolina’s Directive SD-26-1 allows recording rounding on receipts.
In the books: post rounding to its own account (or cash over/short) so it never mixes with taxable sales or tax collected.
Income tax: net rounding gains are ordinary business income and net losses reduce receipts. New Jersey says this explicitly for its corporation and gross income taxes.
State quirks: Washington exempts rounding-up amounts from B&O tax and allows no deduction for rounding down; Maryland excludes up to 2¢ of rounding from the taxable price; Indiana says rounding amounts are not gross retail income; Georgia says no tax applies to rounding gains or losses.

What states with rounding laws say

State	Tax treatment
Alabama	Rounding does not change the sales price, the sales tax due under Ala. Code § 40-23-26, or any surcharge or fee. Collect and remit tax on the unrounded price.
Arizona	State and municipal taxes and fees must be remitted based on the sales price before the cash transaction was rounded (A.R.S. § 44-7952(F)).
California	The rounding adjustment is disregarded when computing any tax, fee or surcharge (Civ. Code § 1789.63). The CDTFA may adopt regulations.
Connecticut	The act rounds the tax-inclusive total and does not change how the tax itself is computed.
Florida	Rounding does not alter the sales price or the tax collected. The Department of Revenue’s TIP 26A01-03 says sales tax remains due on the actual sales price before rounding.
Georgia	The rounding adjustment does not change the sales price under O.C.G.A. § 48-8-2 or the calculation of any other tax, and no tax applies to rounding gains or losses.
Hawaii	Act 159 has no tax provision. We found no Hawaii Department of Taxation guidance on rounding as of October 30, 2026. Because the rounded “total transaction amount” includes taxes, compute general excise tax on the actual price before rounding.
Idaho	Taxes are computed on the total sales price before any rounding (Idaho Code § 63-3643(3)).
Indiana	Sales tax is computed on the unrounded amount. Amounts a seller adds or subtracts by rounding are not gross retail income (IC 6-2.5-1-5(f)). The Department of Revenue says taxes must be paid to the state in full.
Kentucky	Retailers must still collect and remit the correct tax regardless of the payment method (KRS 139.210(6) as amended). The Department of Revenue says tax is calculated to the penny first and rounding happens only after.
Maryland	Tax is calculated on the taxable price before rounding, and the taxable price excludes up to 2 cents collected because of rounding (Tax-General § 11-101(l)(3)(v)). Rounding may not change the calculation of any tax or fee.
Minnesota	The Department of Revenue says to charge sales tax on the sales price, make no adjustment for rounding, and report the full unrounded taxable sales.
Missouri	The tax due on the sale must be remitted regardless of the method of payment. The Department of Revenue’s FAQ says to report and remit the exact tax.
Nebraska	Prices, taxes and fees are calculated before rounding, so rounding changes none of them. Rounding applies only to the final settled cash amount.
Tennessee	Public Chapter 602 does not change the sales tax bracket rule in Tenn. Code § 67-6-504(h). Calculate sales tax to the penny and remit the exact tax shown on the receipt.
Vermont	All taxes and fees are calculated and remitted on the pre-rounding amount. The Department of Taxes says rounding does not change the tax calculation or the amount owed.
Virginia	All taxes and fees are calculated and remitted on the price before any cash rounding (Va. Code § 6.2-200.2(A)). Virginia Tax was directed to report on sales tax effects and uniform procedures by November 1, 2026.
Washington	Sales and use tax is calculated on the selling price without regard to rounding. Business and occupation tax does not apply to amounts added by rounding up, and no deduction is allowed for rounding down.

States with tax guidance but no rounding law

State	Guidance
Colorado	No statute. The Department of Revenue says retailer rounding does not change the sales tax due and the adjustment must be shown as a separate line. Guidance
Iowa	No statute. The Iowa Department of Revenue has published sales tax guidance on rounding. Guidance
Massachusetts	No statute. DOR Directive 26-1 says nickel rounding in either direction does not change the sales tax calculation. Guidance
Michigan	No statute. Treasury has issued a sales and use tax notice on the penny phase-out. A bill (SB 1014) has been introduced. Guidance
Nevada	No statute. The Department of Taxation addresses rounding in its sales tax FAQs. Guidance
New Jersey	No statute. Division of Taxation: rounding is optional, applies to the final total, must be disclosed, and tax stays on the purchase price. Bill A5233 pending. Guidance
North Carolina	No statute. Directive SD-26-1 (Jan. 22, 2026): sales tax is computed first; retailers may round the cash total and record it on receipts. Guidance
South Carolina	No statute. The Department of Revenue has published sales and use tax guidance on the end of penny production. Guidance
South Dakota	No statute. The Department of Revenue has posted guidance on the end of penny minting. Guidance
Texas	No statute. Comptroller: tax is computed on the price before rounding; a retailer may round the total collected and either direction is acceptable. Guidance
Utah	No statute. The Department of Commerce has published a business guide to cash rounding (Nov. 2025). Guidance
Wisconsin	No statute. DOR (Mar. 13, 2026): compute tax to the nearest cent first; any nickel rounding happens after tax. DATCP has consumer guidance. Guidance

Massachusetts Directive 26-1 states that nickel rounding in either direction does not affect the sales tax calculation; the Texas Comptroller will not adjust the sales price for rounding differences of 4¢ or less.

Frequently asked questions

Do I charge sales tax on the rounded amount?

No. Tax is computed on the actual sales price before rounding. Every state law and tax agency guidance we track says the same.

If I round down, can I reduce the tax I remit?

No. The Kentucky Department of Revenue’s July 2026 notice is titled “Penny Shortage Does Not Reduce Taxes Due”: remit the full tax computed on the unrounded price.

Is the extra 2¢ I collect by rounding up taxable?

It is not sales tax. Maryland excludes up to 2¢ of rounding from the taxable price, Washington exempts it from B&O tax, and Indiana excludes it from gross retail income. For income tax it is ordinary business income.

Should the receipt show the rounding?

Yes. Print the exact total, a separate rounding line and the cash paid. Colorado requires the adjustment to be shown as a separate charge.

Does rounding change sales tax on card sales?

No. Card sales are never rounded, so the total and tax are exact.