What is a merchant of record?

The merchant of record (MoR) is the legal seller in a transaction, responsible for charging and remitting sales tax/VAT. With a direct processor like Stripe you are the MoR; with Paddle or Lemon Squeezy the provider is the MoR and handles tax for you.

Do I pay VAT with Stripe?

With Stripe as a direct processor you are the merchant of record, so you are responsible for registering, charging and remitting VAT/sales tax. Tools like Stripe Tax calculate it, but you still file and remit.

Which is cheaper, a direct processor or a merchant of record?

Direct processors like Stripe have lower headline fees (around 2.9% + fixed) but leave tax compliance to you. Merchants of record such as Paddle, Lemon Squeezy and Stripe Managed Payments charge more (around 5% + $0.50) but handle global tax, making them cheaper once cross-border VAT work is factored in.

Paywend — Send every buyer to the right checkout (Stripe, Paddle, Lemon Squeezy)

The one distinction that decides everything

Every processor sits in one of two camps, and the difference decides who files your taxes:

Direct processor

You are the merchant of record

You take the payment directly (e.g. Stripe). Lowest fees, full control — but you register for, charge and remit VAT/sales tax in every market you sell into.

Merchant of record

The provider is the seller

A provider (e.g. Paddle, Lemon Squeezy, Stripe Managed Payments) becomes the legal seller. Higher fees, but they collect and remit tax worldwide, so you don't.

Why "routing"? You can't move a single card between these — each is its own checkout. So the real job is deciding which checkout to open for each buyer: often a direct processor at home for low fees, a merchant of record abroad to offload foreign VAT, and the app stores for in‑app purchases. That's exactly what the Paywend router automates.

Estimate your savings

A quick sense of how much smart routing could cut your processing fees. Enter your monthly sales and where they run today — everything updates instantly.

Monthly sales revenue (USD)

Where your sales run today

Share of sales that are international: 40%

Average order value (USD)

Fees today

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Fees with routing

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Estimated saving

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Estimates only, using representative July 2026 rates (direct ≈ 2.9% + $0.30; merchant of record 5% + $0.50). Actual fees vary by provider, plan, country and card type. Routing sends domestic sales to a low‑cost direct processor and keeps international sales on a merchant of record so worldwide VAT stays handled. Not financial advice.

At a glance (July 2026)

Provider	Role	Who remits tax	Typical fee*	Best for
Stripe (direct)	Direct	You	~2.9% + 30¢	Domestic sales, full control
Stripe Managed Payments	MoR	Stripe	5% + 50¢	Stripe users wanting MoR (new, 2026)
Paddle	MoR	Paddle	~5% + 50¢	SaaS selling globally
Lemon Squeezy	MoR	Lemon Squeezy	5% + 50¢	Digital products, indie makers
RevenueCat	In‑app infra	Apple / Google	Free tier, then % of tracked revenue	Mobile subscriptions

*Headline rates for digital goods, July 2026, and vary by country, plan and card type. Always confirm current pricing with each provider. Fees here are for comparison, not billing.

See the full side‑by‑side comparison →

A sensible default setup

🏠 At home

Use a direct processor (Stripe). Domestic VAT is simple to handle, and you keep the lowest fees.

🌍 Abroad

Use a merchant of record (Paddle / Lemon Squeezy / Stripe Managed Payments) so foreign VAT/GST is collected and remitted for you.

📱 In‑app

Use the App Store / Google Play — they're the mandatory merchant of record for in‑app digital goods. Tools like RevenueCat manage entitlements across both.

This is general information, not tax advice. VAT/sales‑tax rules depend on your registrations and each provider's current terms, and they change. Confirm with a qualified adviser before relying on any setup.

Automate the decision

Paywend is an open, self‑hostable router that turns the table above into code: give it a buyer's country and it returns the right processor, unifies every provider's webhooks into one event stream, and tracks entitlement — while surfacing the merchant‑of‑record / VAT boundary for each sale.

See Paywend Understand the tax boundary

Frequently asked

What is a merchant of record?: The legal seller in a transaction — the party responsible for charging and remitting sales tax/VAT. With Stripe (direct) that's you; with Paddle or Lemon Squeezy it's the provider.
Do I owe VAT when I use Stripe?: Yes — as a direct processor Stripe leaves you as the merchant of record, so you register, charge and remit VAT/sales tax. Stripe Tax can calculate it, but you file and remit.
Is a merchant of record more expensive?: Higher headline fees (~5% + 50¢ vs ~2.9% + 30¢), but it removes cross‑border tax registration and filing — often cheaper once that work is counted.

Send every buyer to the right checkout — and know who owes the VAT.