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A Penny-less Canada: How will it affect your business?

Last March, the Canadian Government announced that as of February 4, 2013, it will eliminate the penny from Canada’s coinage system. Because the manufacturing of one penny translates into 1.6 cents, Jim Flaherty has stated that it is time to remove the penny from circulation. So what does this mean to small business owners? Here is a summary of the key facts that Canadian retailers should know:

  • If the final sale price ends in one, two, six, or seven, it will be rounded down to 0 or 5; and rounded up if it ends in three, four, eight, or nine. (4.99 will be $5.00)

  • Businesses do not need to update their cash registers for rounding. This can be done manually on a transaction to transaction basis.

  • Consumers can continue to use pennies for cash transactions indefinitely when buying goods and services.

  • Businesses should round the final price of the good or service, after tax. This means that current prices for products do not have to be changed.

  • Electronic payments (debit and credit card transactions) as well as cheque payments will not be rounded, and transactions should be completed to the penny. ($4.99 will be $4.99)

  • Sales taxes will not be rounded, only the final sale.

  • The penny will retain its value indefinitely, and continue to be a legal tender. Businesses are encouraged to continue to accept the coin as a means of payment, while making change in pennies is an individual business decision.

The affects on businesses regarding the elimination of the penny is still unclear. In the short term, businesses should not worry. Transactions settled by Debit, Cheque, or Credit will remain the same, while cash purchases will be rounded up or down. It is important to note that businesses do not have to change their POS (Point of Sale) systems for this, as it can be done on a transaction to transaction basis. The grey area of this is the effects on the bookkeeping process. If each cash sale is 2-3 cents off, it can make it very difficult to balance the books. This is a problem that has not yet been addressed, and will come to light over time. For more information regarding the phasing out of the penny, you can refer to the Government of Canada’s Budget 2012, and the CRA’s Tax Implications.

 

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