Merchant of record (MoR) is the legal seller on the customer's statement, owning payments, sales tax and VAT, and chargebacks.
Merchant of record = the legal seller responsible for payment processing, sales tax/VAT remittance, and compliance on each transaction
You sell a £100 subscription through a merchant-of-record provider charging 5% + 50p, versus a bare processor at 1.5% + 20p.
MoR fee = £5.50, leaving £94.50 (but VAT and compliance are handled); bare processor fee = £1.70, leaving £98.30 (but you owe the tax and compliance yourself)
A merchant of record (MoR) is the company that legally sells the product to the end customer and appears on their statement, even if another business actually built and delivers it. The MoR is the party responsible for processing the payment, collecting and remitting sales tax and VAT, handling chargebacks and fraud, and meeting the compliance obligations of every market the sale touches.
The model matters because of what it absorbs. When you use a merchant-of-record provider — such as Paddle, Lemon Squeezy, or FastSpring — they become the seller of record, so they take on the sprawling complexity of global tax registration, VAT thresholds, and regulatory compliance that would otherwise fall on you. A pure payment processor like Stripe moves the money but leaves tax and liability with you, unless you bolt on a tax product.
The trade-off is cost and control. An MoR charges a higher headline fee than a bare processor — often around 5% plus a fixed amount per transaction versus roughly 1.5% + 20p — because that fee buys away the tax and compliance burden. For small teams selling globally, offloading that complexity can be worth the premium; for larger businesses with finance and tax resources, running their own processor and tax setup is usually cheaper.
The merchant-of-record choice decides who carries the tax and compliance burden of selling globally — arguably the most underestimated cost in cross-border SaaS. An MoR trades a higher per-transaction fee for freedom from VAT registration, tax remittance, and chargeback liability across dozens of jurisdictions, which for a small team can be the difference between selling worldwide and being buried in compliance work. The fee premium is the price of that offload.
Merchant-of-record providers charge an all-in fee of roughly 5% to 8% per transaction: Paddle and Lemon Squeezy both list 5% + $0.50 (Lemon Squeezy adds about 1.5% on international cards), while FastSpring lists around 5.9%+ (negotiable down toward ~3.9% at volume); small one-time sales can reach an effective 10%. A bare processor like Stripe sits near 1.5% + 20p in the UK, so the three-to-six-point premium is the price of outsourcing global tax, VAT, and chargeback liability.
The legal entity that sells to the customer and takes responsibility for payment processing, sales tax and VAT remittance, chargebacks, and compliance on each transaction — even if a different company builds and delivers the product.
No. Stripe is a payment processor that moves money but leaves tax and compliance liability with you, unless you add a product like Stripe Tax. Providers such as Paddle or Lemon Squeezy act as the merchant of record and take on that burden. See payment processing fees.
For SaaS and digital products the main MoR providers are Paddle, Lemon Squeezy, FastSpring, and newer entrants like Polar and Dodo Payments. Stripe is not a merchant of record by default (it is a payment processor), though Stripe Tax can be bolted on to handle calculation but not liability.
Beyond the higher fee, you give up some control: the MoR appears on the customer's statement and owns much of the checkout and post-purchase support, you get less granular customer and payment data, and recurring subscriptions are tied to that provider, so leaving means migrating customers to new payment methods.
It usually pays off early, when you sell globally but lack a finance or tax team to register and remit VAT, GST, and US sales tax across dozens of jurisdictions. Once you reach scale with in-house finance resources, a bare processor plus a tax product is often cheaper than an all-in 5 to 8 percent MoR fee.
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