Glossary
What is a merchant of record?
A merchant of record (MoR) is the company your customer is legally buying from. It collects and pays sales tax and VAT, and handles refunds and chargebacks.
The short definition
When someone buys your software, some legal entity has to be the seller. That seller is the merchant of record. It is responsible for charging the right sales tax or VAT, paying it to the tax authorities, handling refunds and chargebacks, and keeping card payments compliant.
Paddle and Lemon Squeezy both describe themselves this way: they sell your product to your customers, take on that liability, and pay you what is left after their fee.
Merchant of record vs payment processor
With a payment processor like Stripe on its own, you are the merchant of record. Stripe moves the money, but tax registration and filing where you have to collect are your job, even if you use tools that calculate the tax for you.
With an MoR, the provider is the seller and handles that. The trade-off is usually a higher fee per sale and less control over checkout and customer data. Many indie makers selling worldwide to consumers pick an MoR to avoid registering for VAT in many places; many B2B products selling into a few countries stay on Stripe.
This is a general description, not tax advice. Rules differ by country and change, so check with an accountant for your case.
Common choices for makers
- Paddle: an MoR for software and SaaS, with subscriptions.
- Lemon Squeezy: an MoR for software, subscriptions and digital products. Lemon Squeezy announced in 2024 that it had been acquired by Stripe.
- Gumroad: a storefront for digital products; check its help center for how it handles tax where you and your buyers are.
- Stripe: a payment processor, with tax tools, where you stay the seller.
All four can show verified revenue on a makerhandle page: see Paddle, Lemon Squeezy, Gumroad and Stripe MRR.
Does it change your revenue number?
It can. An MoR pays you after tax and its fee, so the figure in your payout is lower than what the customer paid. When you share revenue in public, say whether it is gross or net, and stick with it. makerhandle reads each provider's own figures, net of refunds. More in how to verify startup revenue.
Questions
What does merchant of record mean?
The legal entity that sells a product to the end customer. It is responsible for sales tax, refunds, chargebacks and payment compliance.
Is Stripe a merchant of record?
Not in its standard setup. With Stripe as your payment processor you are the merchant of record and handle tax obligations yourself, with or without its tax tools.
Are Paddle and Lemon Squeezy merchants of record?
Yes. Both describe themselves as merchants of record that take on sales tax and payment liabilities for the products they sell.
Why would an indie maker use a merchant of record?
To sell worldwide without registering and filing sales tax or VAT in many countries. The cost is usually a higher fee per sale.
Show revenue from any of them
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