punctuation - Where should the period be put when an entire sentence is quoted at the end of a sentence?

As in the following:

A common proverb is: “A rolling stone gathers no moss.”

A common proverb is: “A rolling stone gathers no moss”.

A common proverb is: “A rolling stone gathers no moss.”.

If the proverb weren't a full sentence, I would immediately put a single period after the quote, at the very end. But if it is a sentence, which period should be removed so that there is only one period? Two periods look absolutely dorky.

Answer

Like all comprehensive answers about English (or those attempting to be so), this answer begins with, “it depends”.

A quotation that is not a complete statement should never have a period within its quotation marks:

The senator, when asked why he refused to support the measure, said that the language of the bill was “confusing and verbose”.

“Confusing and verbose” is not a complete statement; the quotation is simply attributing these exact words to the senator, while summarizing his complete statement largely through omission.

By contrast, a more complete statement attributed to the senator CAN have the period inside the quotes:

The senator, when asked why he refused to support the measure, said: “The American people deserve to understand the laws their representatives in Congress are writing, and this confusing and verbose bill hinders that effort.”

Now, it is still acceptable to place the period outside the quotation marks in this case. However, if the quotation spans the entire sentence from capital letter to fullstop, and/or continues for multiple sentences and comprises a full paragraph, the quotation should enclose the final period.