MSBA blasts Tennessee remittance tax law

By AI, Created 5:15 PM UTC, May 22, 2026, /AGP/ – The Money Services Business Association is opposing Tennessee’s new tax on cross-border payments processed by licensed money transmitters, warning that HB 2502/SB 2166 will raise costs for families and small businesses while pushing more transfers out of regulated channels. The group says the measure, now signed by the governor, could also reduce financial transparency and law enforcement visibility.

Why it matters: - The new Tennessee tax adds costs to everyday cross-border payments used by working families, small businesses, and community members across the state. - MSBA says the law could make regulated transfers more expensive than informal alternatives, weakening consumer access to safe financial services. - The association warns the policy could reduce transparency in the payments system and make it harder for law enforcement to track suspicious activity.

What happened: - The Money Services Business Association publicly opposed Tennessee House Bill 2502 / Senate Bill 2166 after the governor signed the measure into law. - The law imposes a new sales and use tax on cross-border payments processed by licensed money transmitters in Tennessee. - The tax includes a $10 minimum plus 2% of each cross-border payment above $500. - MSBA said the tax targets lawful, everyday transfers relied on by residents and businesses.

The details: - MSBA Executive Director Kathy Tomasofsky said remittances are a lifeline for families and a critical part of the global economy. - Tomasofsky said the tax increase could raise costs for Tennessee businesses and consumers while undermining access to regulated financial services. - HB 2502 applies broadly to senders using regulated channels for legitimate personal needs. - Examples cited include military families, missionaries, faith-based workers, parents paying tuition or medical bills overseas, and grandparents helping relatives abroad. - The association said these transfers are often funded with income that has already been taxed. - MSBA argued the new state levy could stack on top of federal remittance taxation under the One Big Beautiful Bill Act. - Licensed money transmitters often operate through retail agent networks such as grocery stores and pharmacies. - HB 2502 would require those retailers to collect, track, and remit the new tax while also complying with Tennessee’s existing sales tax system. - MSBA said the added compliance burden could increase audit and penalty risk for mistakes. - The association said some retailers may stop offering cross-border payment services, which could cut foot traffic and reduce ancillary sales. - MSBA also said small businesses that use international transfers to pay vendors or employees abroad would face disproportionate harm. - Economist Stephen Moore said during debate on the federal bill that taxing legal transactions could push more activity underground and cost more than it raises. - MSBA said higher costs could drive some consumers toward informal or unregulated transfer networks. - The association said licensed money transmitters operate under AML/CFT rules and provide audit trails and Suspicious Activity Reports. - MSBA said informal networks do not provide those safeguards. - The group cited a U.S. Government Accountability Office finding that similar Oklahoma legislation lowered transaction volumes and risked pushing transfers into unregulated channels. - MSBA also listed affected populations as including military families, missionaries, faith-based workers, students, and people supporting family members abroad.

Between the lines: - The fight is about more than taxes. MSBA is framing the bill as a test of whether states should encourage regulated payment channels or make them less competitive. - The association is also tying the issue to financial crime prevention. A shift away from licensed providers would likely reduce visibility into cross-border money movement. - Tennessee lawmakers may face pressure from retailers as well as consumer advocates if the compliance burden proves hard to manage.

What’s next: - MSBA is urging Tennessee lawmakers to revisit HB 2502 and weigh the effect on consumers, small businesses, and the regulated financial system. - The association said it will keep working with policymakers, regulators, and legislators on the role of the industry and the consequences of a remittance tax. - MSBA said its goal is a safe, transparent, and accessible U.S. payments system.

The bottom line: - Tennessee’s new remittance tax is drawing sharp opposition from the money transmission industry, which says the law will raise costs, shrink access, and push some payments outside the regulated system.