because $1.99 is less than $2. it's a marketing thing. $19.99 => "For less than twenty dollars, you too can have a ShamWow".
whenever you see something that makes you think "why" like this, 99/100 you can blame it on PR/marketing.
I've also heard that this wasn't the case, but that it was to force the cashier to "ring" the transaction through to get the cent to return and not just pocket the $2. And that the custom just stuck.
The sad thing is that my grandfather gave me a collection of “rare” coins when I lived in Ukraine. When I moved to the US I couldn’t take them with me. Would be worth some money today and more memories.