A merchant of record (MoR) is the business that legally sells to the customer: it takes the payment, appears on the receipt, collects and remits sales tax or VAT, and answers for refunds and chargebacks. A software company can be its own merchant of record or hand the role to a provider such as Paddle or Stripe Managed Payments, which then sells on its behalf for a percentage of each sale.
What the merchant of record does
Stripe defines the merchant of record as the entity legally responsible for processing customer payments for goods or services, and liable for the financial, legal and compliance side of those transactions. In practice the role covers five jobs:
- Taking the payment. The MoR’s name is on the checkout, the receipt and usually the card statement.
- Indirect tax. It calculates, collects, files and remits sales tax, VAT and GST where it sells.
- Refunds and chargebacks. Disputes are raised against the MoR, which answers the card network and the issuing bank.
- Fraud. It carries the loss on fraudulent orders it accepted.
- Compliance with card network rules. Stripe’s Connect documentation says the card networks enforce merchant-of-record rules and that violations can lead to fines for the platform and for Stripe.
The business that makes the product keeps the product itself: the software, product support, marketing and its own terms of use. Paddle describes the MoR relationship with the buyer as starting and ending with the transaction.
Merchant of record vs payment processor vs PayFac
The three terms are often mixed up. The difference is who is the seller in law and who carries the liabilities.
| You use a payment processor or gateway | You use a payment facilitator (PayFac) | You use an MoR provider | |
|---|---|---|---|
| Who is the merchant of record | Your business | Your business, as a sub-merchant of the PayFac | The provider |
| Whose name the customer sees | Yours | Yours | The provider’s (for Stripe Managed Payments, “Sold through Link”) |
| Who files and remits sales tax or VAT | You | You | The provider, in the countries it covers |
| Who answers chargebacks | You | You | The provider |
A PayFac signs up businesses as sub-merchants so they can accept cards quickly; each business stays the seller. How that model differs from renting the PayFac role is covered in payfac vs payfac as a service. Stripe makes the same distinction for its own products: with Stripe Tax a business stays the merchant of record and keeps the tax liability, while with Managed Payments Stripe takes the role.
Who is the merchant of record on a platform
On a software platform or marketplace, the question is whether the platform or each seller is the merchant of record. Stripe Connect sets it through the charge type:
| Connect charge type | Merchant of record | Note from Stripe’s documentation |
|---|---|---|
| Direct charges | The connected account (the seller) | Usual for SaaS platforms whose users sell to their own customers |
Destination or separate charges with on_behalf_of | The connected account | If the account’s balance goes negative, the platform covers the loss |
Destination or separate charges without on_behalf_of | The platform | Usual for marketplaces |
Stripe says the checkout, payment flow and terms must make the merchant of record clear to the customer. A marketplace is the MoR because customers buy from the marketplace’s storefront and see its brand on the receipt, even when a third party delivers the goods. The money flows after the sale are covered in marketplace payouts, and the platform models in embedded payments.
Merchant of record providers and their published prices
The providers below sell the MoR role mainly to software and digital product companies. Prices are those on their own pages as of October 3, 2026.
| Provider | What it says it takes on | Published price | Limits stated by the provider |
|---|---|---|---|
| Stripe Managed Payments | Indirect tax in more than 80 countries and 35 product categories, fraud prevention, dispute responses, transaction-level customer support through Link | 3.5% per successful transaction on top of standard Stripe processing fees | Digital products only; works with Stripe Checkout and Payment Links; not supported for Connect platforms; no custom checkout domains |
| Paddle | Payments, checkout and billing, global tax and regulatory compliance, fraud protection, chargebacks and buyer support | 5% + 50¢ per checkout transaction | Custom pricing for high volume and for products under $10 |
| Lemon Squeezy | Sales tax and VAT collection and payment as merchant of record, fraud protection, up to 21 payment methods | 5% + 50¢ per transaction | Some payments may carry additional fees |
| FastSpring | Payment processing, subscriptions, collection and remittance of VAT and sales tax | Revenue share set by quote | Pricing depends on volume and transaction type |
Stripe Managed Payments can cover only some transactions, markets or customer segments, so a business can keep acting as its own merchant of record elsewhere. Where Stripe cannot take tax liability in a country, the business stays responsible for tax there, while Stripe can still act as merchant of record for payments, fraud and disputes. Stripe’s platform product is profiled in Stripe Connect.
When a merchant of record provider fits
An MoR provider is built for a company selling digital products, such as software subscriptions, downloads or digital content, to buyers in many tax jurisdictions, without tax registrations or local entities in each. Paddle lists what a business would otherwise set up itself: merchant accounts in several countries, PCI DSS compliance, local entities, currency conversion, fraud rules, dispute handling and sales tax filing.
It fits less well when:
- The goods are physical. Stripe’s Managed Payments is limited to digital products.
- The platform has sellers of its own. Managed Payments does not support Connect platforms; a marketplace usually becomes the merchant of record itself, or makes each seller one.
- The brand must own the checkout. With an MoR, the provider’s name sits on the checkout, receipt and statement.
- Margins are thin. The provider’s percentage is charged on every sale, on top of or in place of normal processing fees.
Questions to ask an MoR provider
- In which countries do you take legal liability for indirect tax, and where does it stay with us?
- Whose name appears on the card statement and the receipt?
- Who decides refunds, and can we issue them ourselves through the API?
- How are chargeback fees and fraud losses shared?
- Can we use you for some markets or products only?
- How do we export customers and subscriptions if we leave?
