TN: AFC Letter in Opposition of HB 2502

Dear Members of the Tennessee Legislature:

On behalf of a broad coalition of industry, financial services associations, and public policy organizations, we urge you not to advance House Bill 2502 (HB 2502). Our organizations’ collective memberships encompass hundreds of companies engaging in money services and payments activity throughout the United States, including in Tennessee.  

By broadening Tennessee's sales and use tax to include the service of providing cross-border payments, HB 2502 imposes a new tax on lawful, affordable transfers used by individuals and families for everyday purposes. These transfers are typically paid for with income that has already been taxed, and in some cases, may also be subject to federal remittance taxation through the One Big Beautiful Bill. 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.

Licensed remittance providers already operate under one of the most stringent compliance frameworks in the financial system. They are licensed, examined, and supervised at the state level, and at the federal level they are subject to the Remittance Transfer Rule, which mandates detailed disclosures and error-resolution procedures, as well as U.S. sanctions requirements and the Bank Secrecy Act (BSA), which requires extensive Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), recordkeeping and reporting requirements, including Know Your Customer (KYC) requirements. Providers invest heavily in these programs and work closely with law-enforcement agencies to detect and disrupt illicit finance. Licensed money transmitters provide law enforcement with audit trails and BSA reports including suspicious activity reports (SARs). HB 2502 does not enhance these tools. Instead, it layers a new state tax collection and refund process on top of an already nationally administered compliance system, increasing administrative complexity and costs for lawful providers and consumers.

The bill would also harm small businesses and consumers. Many licensed money transmitters offer services through a network of retail agent locations such as grocery stores, pharmacies, and other small businesses, which would be required to collect the tax, collect and remit the tax and comply with Tennessee’s sales tax framework, maintain records, and remit payments, adding cost and liability to already thin operating margins. By subjecting these transactions to Tennessee’s general tax enforcement framework, HB 2502 increases audit and penalty risk for even inadvertent errors, incentivizing some retailers to stop offering cross-border payments services altogether. Reduced access would lower foot traffic and ancillary sales, ultimately reducing income and sales tax revenue for the state. Additionally, small businesses could be disproportionately impacted by this legislation as it would apply to instances where they send money on behalf of their businesses for goods or services, such as paying vendors or employees.  

Importantly, HB 2502 applies to all senders using regulated channels for legitimate, everyday reasons: military families supporting loved ones abroad; missionaries and faith-based workers; parents paying tuition or medical expenses; grandparents assisting relatives overseas. Although the bill includes a refund mechanism, it requires individuals to apply during a limited annual window and provide supporting documentation. If that narrow window is missed, the tax stands. For many working families, seniors, and small businesses, this structure functions less as relief and more as a permanent surcharge.

For these reasons, we urge you not to advance HB 2502. We would be happy, however, to continue facilitating discussions with key stakeholders involved in the money transmission industry, including small businesses and cross-border payment providers, to help reach a shared understanding of the importance of this industry, the harmful effects of a new tax, and the objective of a safe and secure American payments system.

Sincerely,

The concerned organizations listed above.

‍