What is a merchant of record? MoR responsibilities explained
The merchant of record (MoR) is the entity legally responsible for a sale. It accepts the customer's payment and carries the obligations attached to it, such as collecting and remitting sales tax or VAT, issuing refunds and answering chargebacks.
How it works
In the usual setup, your own business is the merchant of record. You sell under your name, and a payment provider handles card transactions on your behalf. The PCI Security Standards Council's glossary describes a payment processor, also called a payment gateway or payment service provider, as an entity engaged by a merchant to handle payment card transactions on its behalf. The provider moves the money; the legal sale is still yours.
Some providers instead act as the merchant of record themselves. They buy the product or subscription from you and resell it to the customer, so the provider takes on payment processing, tax calculation and remittance, compliance and dispute handling, and pays you what is left after its fee. Stripe's guide distinguishes this from a payment facilitator, which groups many merchants under one master account but usually leaves tax collection and disputes with each business.
A worked example
Take a hypothetical $100 software subscription sold to a customer in another country. If you are the MoR, you charge $100 plus any tax due there, register and file where required, and handle refunds and disputes yourself. If a reseller is the MoR, it charges the customer, files the tax, and pays you, say, $92 after a hypothetical 8 percent fee. You trade margin for less administration.
Marketplaces and EU VAT
EU VAT law applies a similar idea to marketplaces. Under Article 14a of the VAT Directive, as inserted by Directive (EU) 2017/2455, a platform that facilitates distance sales of goods imported in consignments with an intrinsic value not exceeding EUR 150, or sales within the EU by a seller established outside it to a non-taxable person, is deemed to have received and supplied those goods itself for VAT purposes (see VAT and OSS).
Common confusions
- MoR vs payment gateway. A gateway or processor moves the payment; it does not become the seller unless your contract says so.
- An MoR does not cover everything. The contract defines which obligations move to the provider. Read what stays with you, such as product claims or customer service.
- Fees are not like-for-like. An MoR fee bundles tax and compliance work, so compare it with processing fees plus your own tax and dispute costs.