Tennessee Remittance Tax Proposal Would Harm State Residents 

 Whether serving overseas, going abroad for a mission trip, or just visiting loved ones, millions of Tennesseans will inevitably find themselves outside U.S. borders. Unfortunately, lawmakers are about to make their lives far more difficult. Proposed legislation—SB 2166 and HB 2502—would impose a new tax on international money transfers. While framed as a modest policy tweak consistent with federal law, the proposal raises a host of practical, economic, and regulatory concerns that undermine its stated goals and would harm taxpayers and consumers the world over. 

At its core, the legislation would apply Tennessee’s sales and use tax to remittances—transactions that are typically funded with income that has already been taxed at the federal level. A worker earning wages has already paid payroll and income taxes. If a federal remittance tax is also in effect, the same dollars could be taxed yet again at the state level—effectively amounting to a triple tax on the same income. This approach risks creating a fragmented system in which identical transactions are treated differently depending on geography. For financial service providers (especially smaller operators) this means navigating overlapping definitions, inconsistent rules, and duplicative compliance obligations. What is currently a largely uniform national system could become a nightmarish patchwork of state-by-state requirements. 

The reach of these bills is also broader than it may initially appear. The tax would apply to all users of regulated remittance services, regardless of their reason for sending money. That includes military families supporting relatives overseas, parents covering tuition or medical expenses abroad, faith-based organizations and missionaries, and small businesses paying international suppliers. In other words, this is not a narrowly tailored policy aimed at a specific subset of transactions—it is a sweeping measure affecting routine and lawful financial activity. 

It is also critical to note that remittances are far from unregulated today. Money transmitters operate under extensive federal oversight through the Bank Secrecy Act and are supervised by the Financial Crimes Enforcement Network. These requirements include identity verification, sanctions screening, transaction monitoring, and mandatory reporting of suspicious activity. At the state level, Tennessee already licenses and supervises these businesses through its own regulatory framework. The proposed legislation simply adds tax collection on top of an already strict compliance system. 

By increasing the cost of using regulated channels even further, the bills could have the unintended consequence of pushing some transactions into informal networks. That shift would make it harder for law enforcement to track cross-border financial flows. Licensed providers generate audit trails and file reports that are critical to enforcement efforts; informal channels do not. Policies that discourage use of the regulated system risk undermining visibility into the very activity lawmakers seek to monitor. 

The economic ripple effects extend further. Cross-border payments are a highly competitive and price-sensitive market. Adding new taxes and compliance burdens will significantly distort that market by raising costs and limiting consumer choice. Providers would need to build systems to collect and remit the tax and manage additional regulatory exposure—costs that companies will be forced to absorb, placing them at a competitive disadvantage relative to foreign-based competitors and financial institutions. 

Whenever state or federal officials change the tax code, it should be to simplify taxes, not make the system more complicated or punish people. SB 2166 and HB 2502 introduce new layers of taxation on already-taxed income, complicate an already-onerous federal system, and risk discouraging participation in regulated financial channels. For everyday Tennesseans, small businesses, and community organizations, the result would be higher costs, greater administrative burdens, and fewer reliable options for conducting routine cross-border transactions. Tennessee lawmakers must reject these harmful and costly bills.