The US remittance tax: the 1% levy and B2B payments from business accounts

A US worker who hands cash to a money transfer agent to support family in Mexico has paid an extra 1% since January 2026. Finance teams that operate in LATAM often ask whether the same charge reaches their supplier, contractor and payroll payments. Under the statute, it does not reach business transfers funded from accounts at covered financial institutions.

At Soulbit Academy we separate what the statute says from what press coverage repeats. This article explains who the tax affects, which funding methods are exempt and what stays the same for a company in Mexico or elsewhere in LATAM. It is the neighbor of remittances vs B2B payments in LATAM, whose market comparison we do not repeat.

The US remittance tax: what the statute says and when it applies

The US remittance tax is a 1% levy on the amount of certain transfers abroad, and it applies to transfers made after December 31, 2025. Section 70604 of Public Law 119-21, the One Big Beautiful Bill Act signed on July 4, 2025, created it.

That section added section 4475 to the Internal Revenue Code, which you can read in the codified text of 26 U.S.C. 4475. The rule has six parts worth separating. The first is the rate: 1% of the transfer amount. The second is the taxpayer: the sender. The third is the collector: the remittance transfer provider. The fourth is the scope: only transfers funded with cash and similar physical instruments. The fifth is the exemptions: accounts at covered financial institutions and US-issued cards. The sixth is the date: transfers after December 31, 2025.

On October 7, 2025, the Internal Revenue Service issued Notice 2025-55, which gives providers limited penalty relief for incorrect tax deposits during the first three quarters of 2026. The notice also confirms the reporting channel: providers file Form 720, the Quarterly Federal Excise Tax Return. Notice 2026-52 extended the penalty relief until before final regulations apply. Both notices guide providers, not companies that make payments.

Is there a final regulation for the remittance tax?

We did not verify a final regulation; what we located is the proposed regulation the Treasury and the IRS released in the Federal Register in April 2026 under the title Excise Tax on Remittance Transfers. Check the Federal Register before applying finer definitions, such as what counts as a similar physical instrument. The statute itself is already in effect.

Who pays the remittance tax and who collects it

The taxpayer is the sender, and the party that collects the tax and sends it to the Treasury is the remittance transfer provider. Section 4475 states that the tax falls on each transfer and is paid by the sender, while the provider collects it and remits it to the Treasury each quarter, in the manner the Secretary prescribes.

If the tax was not paid when the transfer was made, the statute assigns it to the provider for the portion it did not collect. That is why the provider charges it to the sender and remits it to the Treasury. For the recipient in Mexico or any other country, this tax is not a withholding borne by them: the sender bears it. The amount received may still vary because of fees, currency conversion or other charges unrelated to this tax.

One practical consequence is that the recipient has nothing to file or withhold for this tax. The provider reports it on Form 720, and the sender bears it. The roles of provider and sender are not free-form: section 4475 takes its definitions from section 919(g) of the Electronic Fund Transfer Act, which is why that statute matters for the business question below.

Does the person who receives the money in Mexico pay the remittance tax?

No. The sender in the United States pays the tax, and the provider collects it at the time of the transfer, so a recipient in Mexico or elsewhere in LATAM files and withholds nothing for it. How the income is taxed locally is a separate matter that depends on each country's law and on the nature of the payment.

Which funding methods the 1% reaches and which are exempt

The 1% reaches only transfers in which the sender provides cash, a money order, a cashier's check or a similar physical instrument. Transfers funded from an account at a covered US financial institution or with a US-issued debit or credit card are exempt. Table 1 summarizes each method using the text of section 4475 as the basis.

Funding method of the transfer	Treatment under section 4475	Who collects the tax
Cash handed over at a counter or agent	Covered: 1% of the amount	The remittance transfer provider, on receiving the cash
Money order or cashier's check	Covered: 1% of the amount	The remittance transfer provider
Other similar physical instrument	Covered if the Secretary of the Treasury so determines	The remittance transfer provider
Account at a covered US financial institution	Exempt	No tax collected
US-issued debit or credit card	Exempt	No tax collected

The account exemption refers to the categories of financial institution listed in the Bank Secrecy Act (31 U.S.C. 5312(a)(2)(A) to (H)), which are subject to its anti-money-laundering regime.

The test is the funding method, not the destination. A transfer to Mexico and one to Colombia funded with the same cash are taxed the same way, and a transfer funded from a US account is taxed to no destination. The test comes from the text of section 4475, not from the destination. An illustrative case, with assumptions: if a person hands over 500 dollars in cash to send, the tax would be 5 dollars, and it would be zero if they sent the same 500 from their account. These are hypothetical calculation figures, not any provider's prices.

Why a B2B transfer from a business account is outside the tax

A B2B transfer made from a US company's business account is exempt because it is funded from an account at a covered financial institution; in addition, in our reading, the statute's subject is a consumer, not a company.

First, the exemption in subsection (d): the tax does not apply when the funds come from an account at a covered US financial institution. A payment to a Mexican supplier ordered from that account meets the condition. Second, in our reading, the definitions. Section 4475 refers to section 919(g) of the Electronic Fund Transfer Act, under which the sender is a consumer who requests a transfer primarily for personal, family or household purposes. The CFPB official interpretation excludes business or commercial purposes, even when an individual orders the transfer. A corporation paying an invoice is not a consumer in that sense.

It helps to say what is text and what is inference. That the sender is a consumer is in the text of the definitions. That a payment between companies is therefore excluded is our reading, and we found no IRS statement that says so in those words. For a business payment funded with cash, the commercial purpose and the definition of sender require a case-specific analysis. Anyone with that case should consult an adviser.

What if a self-employed individual pays a contractor in cash?

Cash alone is not enough. Under the CFPB official interpretation, an individual who orders a transfer primarily for business or commercial purposes is not a consumer "sender" for this rule. If the person pays someone for a primarily personal or family need and uses cash or another covered physical instrument, the tax may apply. Funding from an account at a covered US financial institution qualifies for the subsection (d) exemption. The purpose of the payment must be assessed in the specific case.

What does not change for companies in Mexico and LATAM

For the business flows described here, funded from covered US accounts or unrelated to outgoing US remittances, the 1% tax does not change the cost of collecting from clients, paying suppliers or disbursing payroll. What may change is the conversation with workers and suppliers who receive personal remittances.

The first thing that does not change is collection from US clients. When the client pays from a business account, the transfer is exempt. The second is paying suppliers abroad, whose cost still depends on the channel, the exchange rate and fees, not on this tax. The third is payroll and contractor payments made by the company, which follow each country's labor and tax rules, not section 4475. The fourth is local withholding: Mexico's withholding regime for payments to foreign residents is not affected by a US excise tax.

Table 2 compares the most common flows of a Mexican company with the effect of the tax. It is a reading of the statute and does not replace tax advice.

Flow	How it is usually funded	Effect of the 1% tax
Mexican company collects from a US client	Transfer from the client's business account	None: exempt funding and a non-consumer sender
US company pays a supplier in Mexico	Transfer from its US account	None: exempt funding
Mexican company pays local payroll in Mexico	Domestic flow, no outgoing US remittance	Not applicable: no outgoing US remittance
Mexican worker receives money from a relative in the US who paid cash	Cash at a counter	1% borne by the relative who sends
Relative sends from an account at a US financial institution	Account at a covered US financial institution	None: exempt funding

For the full corridor, with payroll, suppliers and collections, see the article on the Mexico to United States corridor. If you collect from US clients, the guide on nearshoring and collecting in digital dollars covers the operations. For stablecoin collections in Mexico, read receiving international payments in USDC in Mexico.

What Soulbit's V1 delivers and what it does not

Soulbit offers services for individuals and companies; this analysis focuses on business payments from US accounts. The V1 described here has no function to calculate or collect the US 1% tax. The V1 includes balances in USDC and USDT, explained in the guide to what USDC is and how it works for companies, fiat in USD, EUR and GBP, a local bank rail only in Colombia, KYB, recurring and batch payroll, payment links, collection QR codes, institutional custody and AML/KYT monitoring.

What Soulbit does not do matters here. It does not calculate, collect or file the US remittance tax, and it does not give tax advice. It also does not determine whether a given client payment is exempt: that depends on how the party ordering it funds it, and on their adviser.

A company that moves funds with Soulbit remains responsible for its tax, labor and reporting obligations in each country where it operates. The platform's value lies in organizing balance movement and payment disbursement, not in resolving third-party tax treatment.