Why do SaaS companies use a merchant of record?
To sell worldwide without registering for tax in each country: the MoR provider calculates VAT and sales tax, issues compliant invoices, handles refunds and chargebacks, and pays the vendor a net amount. The price is a higher fee and less control over checkout, as explained in traditional vs embedded payments.
In detail
To sell worldwide without registering for tax in each country: the MoR provider calculates VAT and sales tax, issues compliant invoices, handles refunds and chargebacks, and pays the vendor a net amount. The price is a higher fee and less control over checkout, as explained in traditional vs embedded payments.
What an MoR provider does
An MoR provider is a reseller of digital goods and subscriptions, used by SaaS vendors, app makers and creators. It buys the product from the vendor in the moment of the sale and resells it to the buyer under its own name, so it collects VAT and sales tax worldwide, runs refunds and disputes, and pays the vendor a net amount. It files VAT returns through the EU One-Stop Shop, sales-tax returns in US states, and answers audits.
Why it pays off for small vendors
For a small software vendor selling digital goods to forty countries, an MoR provider turns tax registrations, invoices and disputes into one fee, and the buyer still gets a clear receipt. A software vendor selling to US buyers from Europe would otherwise have to register in dozens of states. MoR services bundle tax, fraud and disputes into one percentage, well above a plain processing rate.
More detail in our #PayDecoding episode on Merchant of record.