The merchant of record is the company that legally sells the product to the buyer. It is the name the buyer sees on their bank statement, the entity that collects and pays the sales tax or VAT, and the one that answers for refunds, disputes and consumer law. In most online stores, that is simply you.

The term matters to creators and small brands because some platforms offer to become the merchant of record in your place. They resell your product, handle tax in dozens of countries, and pay you what is left. It is a real service with a real price, and knowing what you give up and what you gain is the only way to choose.

What is a merchant of record?

A merchant of record (MoR) is the party that holds the sale in the eyes of the law, the tax authorities and the card networks. Its duties are concrete:

  • It appears on the buyer's receipt and card statement.
  • It calculates, collects and remits sales tax or VAT where required.
  • It owns the relationship with the payment processor and the card networks.
  • It handles refunds and answers chargebacks.
  • It carries the consumer-law obligations of the country where the buyer lives.

When you connect your own Stripe or PayPal account to your store, you are the merchant of record. Stripe is a payment processor, not the seller. It moves the money, but the sale, the tax and the customer are yours.

When you sell through an MoR service, the service buys the right to sell your product and resells it to the customer. Legally, the buyer purchased from the service, not from you. You become a supplier who gets paid by the service.

A merchant of record is not the same as a payment gateway, which only processes the card. It is not a marketplace in the usual sense either, although some marketplaces act as MoR for their sellers. And it is not an accountant: an MoR handles tax on the sales it makes, not your income tax or your other business obligations.

Why it matters

The choice changes your costs, your tax work and your control over the customer. Take a creator selling a $97 course to buyers in 20 countries, 100 sales a month.

As your own merchant of record, with Stripe:

  • Processing fee around 2.9% + $0.30, so about $3.11 per sale.
  • 100 sales cost about $311 a month in fees.
  • You handle tax: register where required, collect the right rate at checkout, file returns.

With an MoR service charging around 5% + $0.50, a common range:

  • About $5.35 per sale, so about $535 a month.
  • The service collects and remits tax in every country, handles disputes and issues invoices.

The difference is about $224 a month, or roughly $2,700 a year. That is the price of outsourcing tax compliance and part of the customer relationship. For a seller who would otherwise pay an accountant to file VAT returns in several regions, it can be worth it. For a seller mostly selling in one country, it usually is not.

How it works

The flow of a sale depends on who is the merchant of record.

When you are the MoR:

  • The buyer pays on your checkout, and your payment provider charges the card in your name.
  • The money lands in your provider balance, minus the processing fee.
  • Your provider sends you payouts on its schedule.
  • You collect tax at checkout using your store's tax settings, and you file and pay it yourself or through an accountant.
  • You handle refunds and disputes in your provider dashboard.

When a service is the MoR:

  • The buyer pays the service. Its name appears on the statement.
  • The service charges tax based on the buyer's location and remits it to each authority.
  • It keeps its fee and the tax, then pays you the rest, often on a weekly or monthly cycle.
  • It owns the customer transaction. Refund rules, invoices and sometimes the data you can export follow its policies.

Benchmarks and examples

MoR services such as Paddle, FastSpring and Lemon Squeezy are popular with software and digital product sellers who sell worldwide from day one. Their fees are typically around 5% plus a fixed amount per order, compared with roughly 1.5% to 3.5% plus a fixed amount for a processor alone.

Typical situations:

  • A solo developer selling a $15 app license to buyers in 60 countries. VAT and sales tax rules differ everywhere, volumes are small per country. An MoR often makes sense.
  • A French coach selling a €300 program mostly to French clients. One tax regime, one accountant. Being your own merchant of record is simpler and cheaper.
  • A small brand shipping physical goods in Europe. Tax on physical goods is tied to shipping and customs, and most MoR services focus on digital goods. The brand stays merchant of record.

Common mistakes

  • Thinking Stripe is your merchant of record. It is not. With a standard Stripe account, the tax and the customer are your responsibility.
  • Comparing only the percentage. An MoR fee includes tax filing and dispute handling. Compare it with the real cost of doing those yourself.
  • Forgetting the customer relationship. With an MoR, the buyer bought from the service. Check what customer data you can export and whether you can contact buyers freely.
  • Assuming an MoR covers everything. It covers tax on the sales it makes. Your income tax, business registration and other obligations stay yours.

Best practices

  • Map where your buyers live. If 90% of sales come from one country, the tax work of being your own MoR is modest.
  • Read the tax thresholds that apply to you. Many regions only require registration above a sales threshold. See our note on sales tax on digital products.
  • Calculate the yearly cost of both models. Put your real volume and average price into both fee structures, and add your accountant's fee to the self-managed side.
  • Keep ownership of your customer list. Whatever model you choose, make sure you can export buyers and email them.
  • Revisit the choice as you grow. A model that fits at 30 sales a month may not fit at 3,000.

In Roctify

Roctify is not a merchant of record. You connect your own Stripe or PayPal account, payments go directly to you, and you stay the legal seller on every order. Roctify takes 0% of each sale, so the only transaction fee is the one charged by your payment provider.

Because you are the merchant of record, you are also responsible for VAT and sales tax. Roctify gives you the tools to handle it: VAT and tax settings on your store, prices shown in several currencies, and orders you can review with their tax amounts. Filing returns and registering with tax authorities stays with you or your accountant.

FAQ

Am I the merchant of record if I use Stripe?

Yes, with a standard Stripe account you are the merchant of record. Stripe processes the payment and pays you, but the sale, the tax and the disputes are yours. Your business name should appear on the buyer's statement.

Do I need a merchant of record to sell worldwide?

No. Many creators sell worldwide as their own merchant of record and register for tax only where their sales cross the thresholds. An MoR saves you that work in exchange for a higher fee per sale.

Can I switch from an MoR service to my own store later?

Yes, but plan it. Export your products and your customer list first, check what the service allows you to take with you, and set up your tax settings before your first sale in the new store.