Tennessee to tax cross-border remittances

International money transfer services are poised to become more expensive for Tennessee consumers and businesses. The state's remittance tax law (HB 2502), set to take effect Jan. 1, 2027, would impose a $10 tax on all cross-border remittances and an additional 2 percent tax on transfers exceeding $500.

This is not a novel concept. Oklahoma has been taxing cross-border remittances since 2009 – $5 for remittances under $500 and an additional 1 percent for larger amounts. And the federal One Big Beautiful Bill Act signed into law in 2025 established a 1 percent federal excise tax on international money transfers. These laws apply to transactions using cash, cashier's checks and money orders to affect transfers.

An analysis by the Tennessee Fiscal Review Committee estimated the new law could add $27 million to the state's coffers in the first year, and $54 million in subsequent years. Revenues collected from the Oklahoma tax have steadily increased since the law there took effect, and totaled $13.2 million to state revenues in 2024, according to the state's tax commission.

Stiff opposition

The Tennessee law has been panned by numerous organizations, which, among other reasons, contend it would be harmful to small businesses. Opponents also pointed out that the money sent is typically earned income, which has already been taxed by the state as well as the federal government.

The Money Services Business Association (MSBA) noted in a May 22, 2026, press release that many remittances are made through retail agent networks—grocery stores, pharmacies and other small businesses. The new Tennessee law would require these retailers to collect, maintain records on and remit the new tax while simultaneously dealing with the state's sales tax framework, the MSBA added.

"The predictable result: some retailers may stop offering cross-border payment services altogether, reducing consumer access, foot traffic and ancillary sales – ultimately decreasing state income and sales tax revenue," the MSBA stated. "Small businesses that transmit funds internationally to pay vendors or employees abroad face disproportionate harm."

"Remittances are the lifeline for millions of families and a critical component of the global economy," said MSBA Executive Director Kathy Tomasofsky. "This tax increase risks substantially increasing costs for Tennessee businesses and consumers while undermining access to safe, regulated financial services."

According to the Tennessee Department of Financial Institutions, 16.3 million cross-border transfers totaling $5.5 billion were initiated in the state during fiscal year 2024-25.

"Tennesseans shouldn't face new taxes when sending money to friends, family, business partners or suppliers abroad, or when making charitable donations," said Penny Lee, president and CEO of the Financial Technology Association. "This law raises taxes on Tennessee consumers, businesses and nonprofits, and contradicts recently passed federal law while also running afoul of the Foreign Commerce Clause of the U.S. Constitution."

The Foreign Commerce Clause grants the U.S. Congress exclusive power to "regulate commerce with foreign nations."

Sending business underground

In a May 12 letter urging Governor Bill Lee to veto HB 2502, a group of trade associations, including the ETA, warned that the measure could have the unintended consequence of sending remittances underground.

"Licensed money transmitters provide law enforcement with audit trails and various reports, including on suspicious activity (SARS), in compliance with their Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements. Informal networks provide none of these mandates," the letter stated.

The letter further noted that an analysis by the U.S. Government Accountability Office found that the Oklahoma law led providers to experience lower transaction volumes and highlighted how such measures risk pushing transfers into "unregulated transfer methods," thus undermining their intended purpose.

Governor Lee ultimately signed HB 2502 into law on May 21.

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