What is a merchant of record? MoR vs payment processor (2026)
A merchant of record is the legal seller of your product. It handles sales tax, VAT, refunds, and chargebacks for a fee. Here is how it works and what it costs.
A merchant of record (MoR) is the company that legally sells your product to the buyer. It collects the money, and it owns the sales tax, VAT, refunds, and chargebacks that come with the sale. A payment processor like Stripe only moves the money, so you stay the seller and the tax is yours. Gumroad, Lemon Squeezy, Paddle, Polar, and Stripe Managed Payments act as merchants of record. They charge more per sale for it, usually around 5% or more.
This guide is for creators deciding whether they need someone else to handle tax on their digital products. Full disclosure: we make Eden, a creator store that is not a merchant of record, and we say so plainly below. Every fee here comes from each company's own site or help center, checked in September 2026. This isn't tax advice. Rules depend on where you live and where your buyers live, so ask a tax professional about your case.
Merchant of record, in plain words
When someone buys your ebook, somebody has to be the seller on paper. That seller is the merchant of record.
If you sell with a payment processor (Stripe, PayPal), you are the seller. The processor takes the card payment and sends you the money. If a US state or an EU country says tax was due on that sale, it's due from you.
If you sell through a merchant of record, the MoR is the seller on paper. In effect, it resells your product to the buyer. It adds the right tax at checkout, pays that tax to each government, and deals with the buyer if something goes wrong. You get paid what's left after its fee.
A simple way to picture it: a processor is the card machine. A merchant of record is the shop that sells your product for you.
Merchant of record vs payment processor
| Question | Payment processor (Stripe, PayPal) | Merchant of record |
|---|---|---|
| Who is the legal seller? | You | The MoR |
| Who collects and pays sales tax and VAT? | You (tools can help) | The MoR |
| Who handles chargebacks? | You, with the processor's tools | The MoR (fees vary) |
| Who handles refunds? | You | Usually the MoR, on your policy |
| Typical cost on a US card sale | 2.9% + 30¢ at Stripe | About 5% + 50¢, or more |
| Who owns the buyer relationship? | You | Shared: the MoR is the seller |
What a merchant of record handles
- Sales tax and VAT. Works out the right rate for each buyer, adds it at checkout, files returns, and pays each government.
- Chargebacks. Answers disputes from banks. Some MoRs still pass the dispute fee to you. Polar, for example, charges $15 per dispute.
- Refunds. Processes them. Most MoRs don't return their fee on a refund.
- Fraud and compliance. Screens risky payments and follows payment and consumer rules in the countries it sells in.
- Payment methods and currencies. Local ways to pay, and prices shown in the buyer's money.
What it doesn't handle: your income tax. You still owe tax on the money you earn, wherever you live.
What merchants of record cost
These are the published rates for a standard account. Check each site before you pick, since fees change.
| Service | Fee per sale | Card processing included? | Monthly plan |
|---|---|---|---|
| Gumroad | 10% + 50¢ (30% via its Discover marketplace) | No, 2.9% + 30¢ on top (Discover rate includes it) | None |
| Lemon Squeezy | 5% + 50¢ | Yes | None |
| Paddle | 5% + 50¢ | Yes | None |
| Polar (Starter) | 5% + 50¢ | Not clearly stated | Free; paid plans lower the rate |
| Stripe Managed Payments | 3.5% | No, standard Stripe fees on top | None |
The fine print for each:
- Gumroad has been the merchant of record since January 1, 2025, and handles sales tax worldwide. In any month you pass $20,000 in sales, direct sales drop to 5% + 50¢. More in Gumroad fees.
- Lemon Squeezy adds 1.5% for buyers outside the US, 1.5% for PayPal payments, and 0.5% on subscription renewals. Its fee covers card processing, currency conversion, and taxes. See Lemon Squeezy alternatives.
- Paddle calls its 5% + 50¢ an all-in fee covering tax, checkout, payments, and fraud. Products under $10 need custom pricing.
- Polar moved new accounts (created after May 27, 2026) to 5% + 50¢ on its free Starter plan. Paid plans lower the rate: Pro is $20 a month for 3.8% + 40¢. International cards add 1.5%, and disputes cost $15 whatever the outcome.
- Stripe Managed Payments is Stripe's own merchant of record product for digital goods. It charges 3.5% on top of Stripe's normal processing, so a US card sale costs 6.4% + 30¢. The 3.5% is worked out on the full amount including tax, and subscriptions add Stripe Billing's fee. It doesn't work with Stripe Connect, so platforms built on Connect can't switch it on for their sellers.
Payhip: a middle ground
Payhip doesn't call itself a merchant of record, but it takes on a lot of the same tax work. It collects and pays EU and UK VAT for you. Since July 1, 2026, it also collects and pays US sales tax as a "marketplace facilitator" and most Canadian sales tax (not Quebec's QST yet). Payhip takes 5% on its free plan, 2% on Plus ($29 a month), and 0% on Pro ($99 a month), with Stripe or PayPal fees on top.
The cost on one $30 sale
A US buyer, a US card, a one-time product:
| Service | Total fees | You keep |
|---|---|---|
| Stripe alone (you handle tax) | $1.17 | $28.83 |
| Lemon Squeezy | $2.00 | $28.00 |
| Paddle | $2.00 | $28.00 |
| Stripe Managed Payments | $2.22 | $27.78 |
| Payhip free plan | $2.67 | $27.33 |
| Gumroad (direct sale) | $4.67 | $25.33 |
Polar is left out because its page doesn't say clearly whether card processing is included in its fee. Stripe Managed Payments' fee also grows with any tax on the sale, since it's worked out on the full amount.
So a merchant of record costs about 80¢ to $3.50 more per $30 sale than plain Stripe. Whether that's worth it depends on how much tax work it saves you.
When you probably need one
- You sell digital products to buyers in the EU or UK. The EU taxes digital sales where the buyer lives. Its €10,000 threshold is for businesses based in the EU. If you're outside the EU, VAT on sales to EU consumers generally applies from the first sale. Registering and filing yourself is real work.
- You sell to buyers in many US states. Each state sets its own rules. Stripe's guide notes that most states make you collect tax once you pass $100,000 in sales or 200 transactions there in a year (California and Texas use $500,000). Not every state taxes digital products, and each one defines them differently.
- You'd rather pay a few percent than learn tax law. That's a fair trade for many solo creators.
- You sell worldwide at low prices. Lots of small sales across many countries is exactly the case MoRs are built for.
When you might not
- Your buyers are mostly in your own country, and you already handle sales tax there, or your country doesn't tax your product.
- Your sales are under the thresholds in the places your buyers live. Check this with a tax professional instead of guessing.
- You sell high-ticket services like coaching. Many places tax services differently from digital goods.
- You want the lowest fee and full control, and you're willing to use tax software (like Stripe Tax) and an accountant.
- You want the buyer relationship fully in your name, from receipts to refunds.
Many creators start with a processor while sales are small, then look at an MoR or tax software once they sell across borders in real volume.
Is Eden a merchant of record?
No. Eden is not a merchant of record. You sell through your own Stripe account, so you're the seller, and sales tax through Stripe is yours to handle. Eden takes 5% per sale on the $29 Starter plan, and Stripe's processing comes out of your share. See Stripe fees explained for the full math.
If you want a merchant of record and Eden's products, there's a way to have both. Eden lets you use your own checkout: buyers pay through a checkout like Lemon Squeezy or Gumroad, and Eden gives them access to the product. Eden takes no cut on those sales, and refunds, tax, and chargebacks stay with that checkout. Lemon Squeezy and Gumroad connect directly. Order bumps and upsells only work with Eden's own checkout.
How to sell on Eden
Create a product in Your store → Products → New product: a digital download, a course, coaching, a membership, or a Custom AI. Then choose how buyers pay:
- Eden checkout. Connect Stripe and set a price in USD, EUR, GBP, CAD, or AUD. You handle sales tax.
- Your own checkout. Paste a payment link from Gumroad, Lemon Squeezy, PayPal, or another checkout, and connect it so buyers get access.
Every product shows on your free link-in-bio page. Selling needs the Starter plan. More on the Eden store.
Frequently asked questions
What does merchant of record mean?
It's the company that legally sells the product to the buyer. It collects payment and is responsible for sales tax, VAT, refunds, and chargebacks on the sale.
Is Stripe a merchant of record?
Not by default. Stripe is a payment processor, so you're the seller. Stripe Managed Payments is Stripe's separate merchant of record product, and it costs 3.5% on top of normal processing.
Is Gumroad a merchant of record?
Yes, since January 1, 2025. Gumroad collects and pays sales tax and VAT on your sales.
Do I need a merchant of record to sell digital products?
Not always. It depends on where your buyers live, how much you sell there, and whether you'd rather handle tax yourself. This isn't tax advice, so ask a tax professional.
Is Eden a merchant of record?
No. On Eden checkout you're the seller and sales tax is yours to handle. You can sell through a merchant of record's checkout instead and still deliver the product on Eden.
Want a store where your product teaches buyers, not just hands over a file? Start Eden free and build your first one.