Merchant of record (MoR)
An entity that legally sells products on behalf of another, handling tax, compliance, and chargebacks.
Definition
Merchant of Record (MoR) is the legal seller in a transaction. The MoR handles sales tax, VAT, compliance, chargebacks, and fraud risk. Paddle, Lemon Squeezy, FastSpring are MoR services for SaaS businesses.
Context
MoR services let non-resident-owned LLCs avoid US sales-tax registration in 50 states by routing through the MoR.
Example
A Delaware LLC SaaS company uses Paddle as MoR. Paddle handles US sales tax, EU VAT, and global compliance; LLC receives net revenue.
Common pitfalls
- MoR fees are higher than Stripe (typically 5-10% vs 2.9% plus).
- Trade-off: simpler compliance for higher fees.