Merchant of record

Paddle: “A Merchant of Record (MoR) is a legal entity responsible for selling goods or services to an end customer. They manage all payments and take on the associated liabilities, such as collecting sales tax, ensuring Payment Card Industry (PCI) compliance, and honoring refunds and chargebacks.”

Stripe: the merchant of record “is responsible for the calculation, collection and remittance of sales tax, value-added tax (VAT) or goods and services tax (GST)”.

Dodo Payments: “A Merchant of Record is the legal entity that sells to your customer, appears on the customer's card statement, and is responsible for the transaction.”

All three are companies that sell MoR services, so read them as descriptions, not neutral advice.

A founder in India sells a $20-a-month SaaS subscription to a consumer in Germany.

Through a gateway, the founder is the seller. Sales of digital services to EU consumers are generally taxed with VAT at the customer's country rate, so the founder may need to register for EU VAT (for example through the EU's One Stop Shop scheme for non-EU sellers), charge it on the invoice and file returns. Other countries have their own rules. On the Indian side, the founder also has to work out whether the sale counts as an export of services for GST.

Through a merchant of record, the MoR is the seller. It charges the German VAT, pays it and deals with the customer's bank if there is a chargeback. The founder receives a payout, less the MoR's fee. The founder still reports that income in India, and how GST applies to the founder's side depends on the arrangement.

Tax rules change and depend on the facts. This is a general picture, not tax advice. Check with a chartered accountant before you choose.

• A gateway tends to suit founders whose customers are mostly in India, or businesses selling to other businesses, where the foreign tax work is smaller.
• A merchant of record tends to suit founders selling to consumers in many countries who would rather pay a higher fee than register and file tax abroad.
• Compare the cost on a real sale with the fee calculator, and check the GST side with the GST on SaaS exports checker.

Ventmark uses Dodo Payments as the merchant of record for its own paid plans. Dodo Payments is also one of the providers Ventmark revenue verification is built for, along with Stripe and Razorpay. This page does not recommend any provider.