What happened to the penny bowl that used to be a fixture next to almost any business’s cash register? Gone, now that the cessation of penny production has led to a penny shortage. As a result, New Jersey now allows, but does not require, businesses to round up or down to the nearest nickel when dealing with a cash-paying customer.
If a business chooses to round, the policy must be clearly and conspicuously disclosed before the customer is charged. If payment is received in cash, rounding can only be applied to the final transaction after all taxes and fees are added.
For sales tax reporting purposes, the sale is reported and sales tax is collected based on the selling price BEFORE any rounding. However, for income or corporate business taxes, the actual amount received should be the reported income. Rounding up is additional income to the seller while rounding down reduces gross receipts.
Businesses can be creative with the notice of a rounding policy to customers. For those not so inclined, the Division of Consumer Affairs has created a colorful display that can be found at: https://www.njconsumeraffairs.gov/News/Documents/penny-alert.pdf?utm_source=govdelivery&utm_medium=email&utm_campaign=20260213_nwsltr&utm_content=biz&utm_term=reg.
Article contributed by Lois S. Fried, CPA, CFE, CBA, ABV
