Tennessee Comptroller Jason Mumpower issued comprehensive guidance for local governments and utilities on handling cash transactions as pennies phase out. The guidance outlines five options including encouraging exact change, electronic payments, account credits, declining cash, or adjusting rates. The Department of Revenue separately confirmed sales tax remains due on actual prices before rounding.
Tennessee Comptroller Jason Mumpower released official guidance to help local governments and utilities navigate the transition away from penny-based transactions following the federal government's decision to cease penny production.
Five Options for Local Governments
The Comptroller's guidance outlines five approaches local government entities and utilities may consider:
- Encourage exact change - Ask customers to provide exact payment amounts when possible
- Offer electronic payment options - Promote debit cards, credit cards, and online payment methods that don't require physical change
- Credit customer accounts - Apply small overpayments as credits toward future transactions
- Decline cash payments - Where legally permissible, transition to electronic-only payments for certain services
- Adjust rates - Modify fees, rates, and charges to amounts ending in 5 or 10 cents to eliminate the need for pennies
Sales Tax Clarification
The Tennessee Department of Revenue issued separate guidance confirming that sales tax obligations remain unchanged by rounding practices. Key points include:
- Sales tax must be calculated on the actual sales price before any rounding adjustment
- The tax rate applies to the true transaction amount, not the rounded amount
- Businesses should maintain records of both the original price and any rounding applied
Why This Matters
Tennessee is among the first states to issue specific guidance for government entities, addressing a gap left by federal policy. While the U.S. Treasury issued general recommendations in December 2025, local governments face unique challenges with utility bills, permit fees, court fines, and other government services.
Background
The guidance comes as communities across Tennessee adapt to the practical realities of penny scarcity. With the U.S. Mint having ceased penny production in November 2025, local governments that collect cash payments for various services needed clarity on compliant approaches.