The department posted guidance addressing the penny shortage for sales tax calculations for cash transactions on January 8, 2026. The sales tax liability on all retail sales must be calculated to the nearest penny. The article recommended that retailers round to the nearest nickel but only after calculating the tax liability. Examples of both rounding down and rounding up as appropriate were provided.
However, effective July 15, 2026, traditional rounding is not merely a suggestion but a requirement with cash transactions when pennies are unavailable (KRS 45.345). Legislation requires rounding cash transactions to the nearest five cent ($0.05) increment.
If the amount due, including tax, ends in one cent ($0.01) or two cents ($0.02), then the rounding is down to the nearest ten cents ($0.10).
If the amount due, including tax, ends in three cents ($0.03) or four cents ($0.04), then rounding is up to the nearest 5 cents ($0.05).
The same process works for rounding down when the amount due ends in six cents ($0.06) or seven cents ($0.07) and rounding up to the nearest 10 cents ($0.10) when the amount due ends in eight ($0.08) or nine cents ($0.09).
New language in
KRS 139.210 maintains that “regardless of a purchaser’s method of payment, a retailer shall not be relieved of the retailer’s responsibility to collect and remit the correct amount of tax due.”