Dive Brief:

• Tennessee will impose a $10 tax for cross-border payments and an additional 2% of the transaction amount for those over $500 under a law Republican Gov. Bill Lee signed last week. The law takes effect Jan. 1, 2027.
• Tennessee expects to raise about $54.8 million in annual revenue from the law, according to a March review by the legislature’s Fiscal Review Committee. About 16.3 million international money transmissions were made from Tennessee in the 2024-25 fiscal year, valued at $5.5 billion, according to the committee.
• Trade groups representing companies that provide cross-border payment services objected to the new tax. “This tax increase risks substantially increasing costs for Tennessee businesses and consumers while undermining access to safe, regulated financial services,” Kathy Tomasofsky, executive director of the Money Services Business Association, said in a Friday press release. The association urged lawmakers to reconsider the bill’s “wide-ranging consequences.”

Dive Insight:

Given the new law, Tennessee has become the second state, after Oklahoma, to tax cross-border payments, according to the Electronic Transactions Association. Lee signed the legislation into law on Thursday, according to the Tennessee General Assembly website.

The Financial Technology Association, which lobbied against the measure, said in a press release Thursday that the tax “unfairly discriminates against transactions processed by money transmitters, as it applies only to funds processed by those entities, not to those processed by other financial institutions, including banks.”

Earlier this month, a half dozen trade associations wrote to the governor urging him to veto the measure, including the ETA, FTA and the American Fintech Council. Those groups represent money transmitters such as Intuit, Payoneer, Remitly and Wise.

“Adding a state sales tax layer increases the cumulative burden on ordinary Tennesseans sending modest amounts to support family members, pay tuition or medical expenses, assist military relatives abroad, or fund religious and charitable activities,” the groups wrote in their May 12 letter. 

They also warned that “when formal remittances become more expensive, many respond by turning to informal or unregulated alternatives, where there is little or no oversight.”

Such cross-border payments are often used by migrant workers in the U.S. to share their earnings with family or friends. Immigration has become a charged U.S. political topic, with President Donald Trump’s administration seeking to curb the number of people coming to the United States.

The legislation’s Republican sponsors – Tennessee House Speaker Cameron Sexton and Sen. Bo Watson – did not respond to emails Tuesday seeking comment. Lee’s office did not respond to messages Tuesday seeking comment on the law.

Last year, Trump signed a budget bill imposing a new 1% federal excise tax on foreign remittances paid with cash, money order or cashier’s check.

The issue of remittances continues to garner interest among some Republican lawmakers in Congress. Last week, a Texas Republican, Rep. Chip Roy, introduced a bill in the House of Representatives that would hike the 1% U.S. excise tax on remittances to 25%.

“The United States economy has dealt with the inextricably linked harmful effects of unchecked legal and illegal immigration and the drain of American dollars leaving the economy through remittances for decades,” Roy, who represents a district north of San Antonio, said in a Thursday press release.

The ETA believes that Roy’s proposal would “drive remittances to risky and unregulated participants,” Scott Talbott, an ETA executive vice president, said Tuesday in an email.

Last year, an Oklahoma state lawmaker sought to double the fees associated with that state’s 2009 law assessing fees on money transfers. Oklahoma charges $5 for sending under $500 and an additional 1% for higher amounts. That Oklahoma House bill did not receive a vote.