Merchant of Record

A merchant of record (MOR) is the entity whose name appears on a customer's bank or credit card statement when they make a purchase. More importantly, it's the entity that takes on legal and financial liability for the transaction. That means handling sales tax, VAT, GST, chargebacks, refunds, and payment compliance. You'll sometimes see this called a "seller of record." Same concept, different name.

If you sell software through Stripe, you're the merchant of record. Your company name is on the receipt, and you're responsible for collecting and remitting tax in every jurisdiction where you have customers. If you sell through Paddle or Dodo Payments, they're the merchant of record. They handle tax, disputes, and compliance on your behalf.

How a merchant of record works

When a customer buys your SaaS product through a MOR, the flow looks different from a standard payment gateway setup. The customer pays the MOR, not you. The MOR calculates and collects the correct tax, processes the payment, handles any disputes or chargebacks, and then pays you your share minus their fee.

This matters most for tax. If you're selling globally through Stripe, you need to register for VAT in the EU, GST in Australia, sales tax across US states, and dozens of other jurisdictions. Miss one and you're technically non-compliant. A MOR handles all of that. You get a single payout.

Chargebacks work differently too. With a payment gateway, a chargeback hits your account directly and can affect your processing rates. With a MOR, the chargeback is between the MOR and the cardholder. You're insulated from the dispute process.

MOR vs payment gateway vs payment facilitator

These three terms get mixed up constantly, but they describe fundamentally different relationships.

A payment gateway like standard Stripe connects your application to card networks and processors. It moves money. It doesn't take on liability, handle tax, or deal with chargebacks on your behalf. You're the merchant of record.

A payment facilitator (PayFac) sits between individual merchants and the acquiring bank. Stripe is also a PayFac: it lets you accept payments without setting up your own merchant account. But you're still legally the seller. Tax, compliance, and disputes are still yours.

A merchant of record replaces you as the seller entirely. Paddle, Dodo Payments, and FastSpring are MORs. They sell your product on your behalf, handle compliance, and pay you a revenue share. Stripe has recently entered this space too with Stripe Managed Payments, though it's a newer offering with some limitations.

Who uses a merchant of record

SaaS founders selling globally. That's the core audience.

If you're a bootstrapped founder shipping a $29/month product and you've got customers in 15 countries, dealing with VAT registration in each one isn't realistic. A MOR handles it. You focus on building the product.

Larger SaaS companies use MORs too, particularly when expanding into new markets. The alternative is hiring tax specialists, registering in every jurisdiction, and managing ongoing compliance. For many teams, the 4-6% MOR fee is cheaper than the operational overhead of doing it yourself.

MOR providers

Paddle is the most established MOR for SaaS. It charges 5% + 50¢ per transaction, all-inclusive regardless of payment method or customer geography. Handles tax in 200+ countries. Paddle offers its own retention tool (Retain), but it's enterprise-priced.

Dodo Payments targets indie developers and small SaaS teams. The base rate is 4% + 40¢, but international cards add 1.5% and subscriptions add 0.5%, so the effective rate depends on your customer mix. It's particularly popular with solo founders selling digital products.

Stripe Managed Payments is Stripe's MOR offering, announced in 2025 and currently in private preview. It handles tax and compliance through Stripe Checkout, but requires Checkout (no custom UIs), only supports subscriptions, and pricing isn't publicly disclosed. For a deeper comparison, see merchant of record vs Stripe.

Polar targets developers and open-source maintainers. The base rate is 4% + 40¢, but international cards add 1.5% and subscriptions add 0.5%, so the effective rate on a typical cross-border subscription is closer to 6-7%.

Other providers include FastSpring (established, enterprise-leaning, 5.9% + 95¢), Gumroad (creator-focused, 10% + 50¢ plus separate processing fees), and Creem (newer entrant at 3.9% + 40¢, all-inclusive with $0 dispute fees). Lemon Squeezy was a popular option until Stripe acquired it in 2024; it's being absorbed into Stripe Managed Payments. For a full comparison, see our merchant of record providers guide.

When you don't need a MOR

A MOR isn't always the right call. If you're selling in a handful of countries where you're below the VAT registration threshold, you might not owe any tax at all. Using a MOR in that situation means your customers pay VAT they wouldn't otherwise need to, which makes your product more expensive for no reason.

Most EU countries have distance selling thresholds. If your revenue in a particular country is below the threshold, you're not required to register or charge VAT there. A MOR charges VAT regardless, because they're the seller and they're registered everywhere. That's great when you're doing real volume across dozens of markets. It's an unnecessary cost when you're doing $2,000/month in France.

The same applies to US sales tax. You only owe sales tax in states where you have "nexus," which essentially means a sufficient connection to that state. Nexus can be triggered by having employees, an office, or exceeding a revenue threshold (typically $100,000 in annual sales or 200 transactions) in a given state. Many small SaaS businesses only have nexus in a handful of states. A MOR collects sales tax in every state where it applies, whether you'd need to or not.

In short: if you're early stage, selling in a few markets, and below the relevant thresholds, standard Stripe with no tax collection might be the right move. You can always switch to a MOR later when the compliance burden actually justifies the fee.

MOR and failed payment recovery

One thing that catches founders off guard: using a MOR doesn't eliminate involuntary churn. Payments still fail. Cards expire, banks decline charges, customers hit temporary balance issues. We've seen the payment failure rate hold steady at 5-10% across processors, regardless of whether you're on a gateway or a MOR.

The difference is in your options. Some MORs offer built-in retry logic, but the dunning capabilities vary widely. Paddle's Retain is a full retention suite but priced for enterprise. Most other MORs offer basic retries at best. That's where dedicated dunning recovery comes in.