Fintech group asks court to 86 Tennessee remittance tax

The Financial Technology Association is challenging the constitutionality of a new Tennessee law that would impose a sweeping new sales tax on international remittances. The fintech trade group filed a declaratory judgment action in the Davidson County Chancery Court, asserting the tax imposes significant costs on consumers and businesses that send money abroad and runs afoul of the U.S. Constitution. It is seeking a permanent injunction against enforcement of the law.

Under a law passed in May 2026, Tennessee would impose a $10 tax on all cross-border remittances sent through licensed money transmitters, beginning Jan. 1, 2027, plus 2 percent of the transaction for remittance amounts over $500. The tax is expected to add as much as $54 million a year to state coffers.

Challenging the constitutionality

"When a state singles out international payments for special taxation, that is unconstitutional, plain and simple," said Penny Lee, president and CEO of the FTA. The dormant Commerce Clause [of the U.S. Constitution] exists precisely to prevent this kind of unilateral state action. Tennessee consumers sending money to friends and family or business owners paying global vendors or suppliers should not face a higher cost simply because a state decided to tax the way they transact."

In a fact sheet, the FTA said the tax will send a large number of cross-border remittances underground and could stymie law enforcement, as regulated remittance houses are bound by know your customer and anti-money laundering laws.

The FTA argues the Tennessee law is a "facial violation" of the Constitution’s dormant Commerce Clause because it singles out international money transmissions for special taxation. The association also contends the measure conflicts with the Import-Export Clause, which limits states’ ability to impose taxes affecting exports. Under U.S. Supreme Court precedent, laws that discriminate against foreign commerce are generally presumed unconstitutional or “virtually per se invalid,” the group said.

Not a one off

The taxation of international remittances 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.

During debate on the Tennessee law in the state legislature the FTA lobbied to amend it to reflect current federal law. It also joined other trade groups in urging Governor Bill Lee to veto the bill, but he declined to do so.

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