What "merchant of record" means
The merchant of record (MoR) is the business that legally sells the product to the customer. It appears on the receipt, owns the customer relationship for payment purposes, and — crucially — is responsible for calculating, collecting, filing and remitting sales tax or VAT.
There are two ways to sell:
- You are the merchant of record — you use a direct processor such as Stripe. You keep more of each sale, but you must handle tax everywhere you have obligations.
- A provider is the merchant of record — you sell "through" Paddle, Lemon Squeezy, or Stripe Managed Payments. They take a bigger cut, but they own the tax compliance globally.
Who remits the tax, concretely
| Scenario | Merchant of record | Who charges & remits VAT/tax |
|---|---|---|
| Stripe (direct), home‑country buyer | You | You (domestic VAT if registered) |
| Stripe (direct), overseas buyer | You | You — may need to register in the buyer's region |
| Paddle / Lemon Squeezy / Stripe Managed Payments | The provider | The provider, worldwide |
| App Store / Google Play (in‑app) | The store | The store |
The cross‑border catch
Selling across borders is where "just use Stripe" gets expensive in time. Many jurisdictions expect you to charge local VAT/GST on digital sales to their consumers — sometimes from the very first sale.
- EU/EEA: B2C digital sales generally attract destination‑country VAT. Non‑EU sellers can register for the non‑Union OSS scheme (or IOSS for low‑value goods) to file across the EU in one return, instead of registering country‑by‑country.
- UK: domestic VAT once you're over the threshold; overseas rules apply for inbound/outbound digital sales.
- US: sales‑tax "nexus" varies by state and by economic thresholds.
- Rest of world: many countries (Australia, Canada, Norway, etc.) have their own digital‑services tax registration rules.
So when should you switch to a merchant of record?
Rules of thumb (not absolutes):
Stay direct (Stripe) when…
Most sales are domestic, volumes are modest, and you can handle one VAT return. You value the lowest fees and full control of the checkout and data.
Use a merchant of record when…
You sell internationally, to many countries, and cross‑border VAT registration would eat your time. Predictable "one cut, no tax admin" is worth ~5%.
Many businesses do both: direct at home, MoR abroad. Splitting by the buyer's country is exactly the routing problem this site is about — and what the Paywend router automates.
What changed in 2026
Stripe — historically the classic direct processor — now also offers Stripe Managed Payments, its own merchant‑of‑record product (public preview, 2026), priced like Lemon Squeezy at 5% + 50¢. Stripe acquired Lemon Squeezy in 2024. In other words, Stripe now sits on both sides of this boundary, so "which Stripe product" is itself a routing choice. See our Stripe page.