A merchant of record is the entity legally selling to the customer, which means it handles payment processing plus the sales tax and VAT obligations that come with the sale. Services such as Paddle and Lemon Squeezy act as merchant of record; a payment processor like Stripe generally does not.
Why does Merchant of record matter for founders?
For a non-resident selling software globally, a merchant of record removes the burden of registering for VAT and sales tax across many jurisdictions, at the cost of a higher fee and less control over the customer relationship.
Where can I read more about Merchant of record?
Note: A plain-English definition for orientation, not legal or tax advice. Rules change - last checked 2026-07-21.