Explained to kids!
A merchant of record is the shop whose name is on your receipt. It is the one you really pay, the one that owes the tax, and the one you go back to if something is wrong. Sometimes it is not the person who made the thing at all.
Let’s see it in real life…
Every spring, Keziah helps her aunt Dana at the town craft fair.
Aunt Dana runs the big table at the entrance, with the only cash box of the whole fair.
Mr. Lim brings his honey, the twins bring bracelets, old Rosa brings jam. They all put their things on the table.
A lady picks a jar of honey and two bracelets. She pays once, with her card, to Aunt Dana. Her receipt says “Spring Fair”.
Keziah asks: “But the honey is Mr. Lim’s. Why does the money go to you?”
“Because I am the one selling it,” says Aunt Dana. “I sign for it, I keep the receipts, and I send a part to the town hall for the tax.”
An hour later, the lady comes back: the jar is cracked. She does not look for Mr. Lim. She comes to Aunt Dana, who gives her money back right away.
At the end of the day, Aunt Dana opens her notebook. Honey: nine jars. Bracelets: twenty. Jam: six.
She gives each maker their share, minus a little for the table and the tax.
Mr. Lim smiles: “I only had to make honey. You did all the rest.”
That is a merchant of record.
Tiny recap
- It means… the name on the receipt is the one you really pay. It owes the tax and must fix problems.
- It helps when… lots of small makers want to sell without doing the paperwork themselves.
- Watch out for… the merchant of record takes a share, and it is responsible for everything sold under its name, even the cracked jars.
…detailed for specialists
A merchant of record (MoR) is the legal entity that sells to the buyer: the name on the checkout, the receipt and the card statement. It owes the sales tax or VAT, carries refunds and chargebacks, and must follow consumer law. The MoR can be the seller itself, a marketplace, or a specialized reseller that sells on behalf of software companies and creators.
The question matters more in 2026 because tax authorities, card schemes and consumer regulators all start from the same point: who sold this? EU platforms become VAT collectors, US states hold marketplaces liable for sales tax, and the FTC has fined a merchant-of-record provider for what was sold under its name. For PSPs, PayFacs and platforms, the MoR decision shapes onboarding, settlement, disputes and tax evidence for every transaction.
What is a merchant of record?
Stripe’s Connect documentation states that the MoR is the entity that the customer understands they’re buying from, and the one responsible for refunds and disputes. Four criteria follow: the brand the buyer sees at checkout, the entity liable for chargebacks, the name on the statement descriptor, and the holder of title to the goods or the provider of the service. A brief “flash” transfer of title is not enough: the customer must believe they are buying from the MoR.
Being the MoR is a legal and commercial position, not a technical one. The same acquirer connection can serve a marketplace selling in its own name and a SaaS platform whose users sell in theirs. What differs is who signs the sale, who owes the tax, and who answers the buyer. We map the other roles in who’s who in payments.
Merchant, marketplace, PayFac or MoR provider: who is the seller?
- Direct merchant. A shop with its own merchant agreement is its own MoR. It invoices, collects tax and handles disputes itself.
- Marketplace. Visa describes a marketplace as an entity that brings together customers and sellers on a single, marketplace-branded platform, contracts with the acquirer itself, issues the receipt in its own name and handles refunds and disputes. The marketplace is the MoR, and the sellers are not merchants in the scheme’s sense. Visa also caps what an individual retailer can do under that umbrella: no individual retailer on a marketplace can exceed $10 million in annual Visa transaction volume, nor represent more than 10% of the marketplace’s volume.
- Payment facilitator. A PayFac signs merchant agreements on behalf of an acquirer and receives settlement for its sub-merchants. The sub-merchant stays the MoR: its name is on the descriptor, it owes its own taxes, and the dispute is about its sale. The PayFac carries the financial liability toward the acquirer, which is a different thing. The split is detailed in PayFac vs ISO.
- MoR provider. 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. The model has consolidated: Stripe acquired Lemon Squeezy in July 2024 with the stated aim to “scale merchant of record selling in a big way”.
How a merchant-of-record sale works
- Checkout in the MoR’s name. Terms, receipt and statement descriptor all show the MoR. Stripe warns that a mismatch between the brand at checkout and the name on the statement can lead to disputes and card-network compliance concerns, including fines.
- Tax calculation. The MoR determines the buyer’s location, applies the right VAT, GST or sales-tax rate, and issues a compliant invoice.
- Authorization and capture run under the MoR’s merchant ID and merchant category code, which also fixes the interchange and the dispute rules that apply.
- Settlement to the MoR. Funds land with the MoR, gross of tax. The MoR keeps the tax, its fee and a reserve, and pays the vendor or seller net, on its own payout schedule.
- Refunds and disputes. The buyer calls the MoR. A chargeback hits the MoR’s ratio, not the vendor’s.
- Filing. The MoR files VAT returns through the EU One-Stop Shop, sales-tax returns in US states, and answers audits.
Why do taxes drive the merchant-of-record model?
In the EU, the 2021 e-commerce package made marketplaces “deemed suppliers” for two cases: imports in consignments of an intrinsic value not exceeding €150, and any EU sale where the underlying supplier is established outside the EU. The platform accounts for the VAT, and declares it through the One-Stop Shop (OSS) or the Import One-Stop Shop (IOSS), both live since 1 July 2021. The next step is already law: the VAT in the Digital Age package was adopted on 11 March 2025 and extends deemed-supplier rules to short-term accommodation and passenger transport platforms from 1 July 2028.
In the United States, the 2018 Wayfair ruling let states tax remote sellers, and states pushed the collection duty onto marketplaces. Today 45 states and DC require marketplace facilitators to collect sales tax, with an economic-nexus threshold of $100,000 in most states. A software vendor selling to US buyers from Europe would otherwise have to register in dozens of states. Our guide to payment methods in the United States covers the local acceptance side.
Merchant of record in numbers (2026)
- Cross-border e-commerce: global cross-border online sales are forecast to approach US$1.2 trillion in 2026, after passing US$1 trillion in 2024.
- US sales tax: 45 states and DC make marketplaces collect on behalf of their sellers.
- EU VAT: platforms are deemed suppliers for imports up to €150 and for non-EU sellers; new sectors follow from 1 July 2028.
- Enforcement: an MoR provider agreed to pay the FTC $5 million in June 2025 over payments it processed for tech-support schemes as merchant of record.
- Marketplace limits: Visa caps a single retailer under a marketplace at $10 million in annual Visa volume and 10% of the marketplace’s total.
What are the risks of being the merchant of record?
The MoR is liable for everything sold under its name. The 2025 FTC case shows where that ends. The agency alleged that the provider opened merchant accounts claiming to be a “merchant of record” or software “reseller”, then used them to process for many unrelated merchants, some of them running fake virus alerts. The settlement adds a permanent ban on processing for tech-support telemarketers and enhanced screening of high-risk clients. A legal analysis of the case notes the FTC’s view that the provider should have registered with the card networks as a payment facilitator, since its clients set the price and the refund terms, and that pooling many sellers under one merchant account can hide problem sellers from acquirers.
Three practical risks follow. Disputes: every vendor’s chargebacks count in the MoR’s ratio, so one bad vendor can push the whole account into a scheme monitoring program. Tax: the MoR answers audits for sales it did not design. Consumer law: subscription disclosures and refund policies are the MoR’s duty, whatever the vendor’s page says.
Merchant of record: what changes for PSPs, PayFacs and platforms
Onboarding: know who the seller is
A platform that onboards an MoR provider onboards a merchant with thousands of hidden sellers. KYB must go one level down: who the vendors are, what they sell, in which countries. A SaaS platform that lets its users sell in their own name should instead onboard each user as a sub-merchant, as described in embedded payments for SaaS: from referral partner to PayFac. Mixing the two models under one MID is exactly what regulators and schemes now challenge.
Descriptors, MCCs and receipts must tell one story
Name at checkout, statement descriptor, receipt and dispute correspondence must name the same entity. Where the platform is the MoR, that is the platform; where the seller is, the dynamic descriptor must carry the seller’s name.
Settlement, payouts and reconciliation
An MoR receives gross funds, including tax, then splits them: tax reserve, fee, dispute reserve, net payout per vendor, often in another currency. Reconciliation must tie each payout to the original authorizations and to the tax collected, so the OSS return and the vendor statements agree.
Disputes and evidence
The MoR fights the chargeback but the vendor holds the delivery proof. Platforms need a channel to collect evidence from vendors within the deadline, and a way to charge back the loss to the vendor afterwards.
Pricing and compliance evidence
MoR services bundle tax, fraud and disputes into one percentage, well above a plain processing rate. Platforms that compete with them should price the pieces separately, and keep the compliance evidence (who was screened, when, by whom) ready for the acquirer and the scheme. NORBr Onboarding Workflow lets a PSP or PayFac run that KYB flow for its merchants and sub-merchants under its own brand, and Reconciliation & Settlement ties payouts back to transactions. Acquirers and methods available to route to are listed in our connectors directory.
For a longer read on how acquiring roles are shifting, the Payments Library has The State of B2B Embedded Finance 2026, and in #TheShot, Own the checkout, own the revenue explains why platforms want to control the sale in the first place. The payments without the PSP burden solution describes the alternative for ISVs that want the revenue without becoming the seller of record.
Is a merchant of record worth it in 2026?
For a small software vendor selling digital goods to forty countries, yes: an MoR provider turns tax registrations, invoices and disputes into one fee, and the buyer still gets a clear receipt. For a marketplace, being the MoR is often not a choice but the scheme definition of what it is. For a PSP, PayFac or SaaS platform, the answer is usually the opposite: keep each seller as the merchant of record, onboard it properly, show its name on the statement, and provide the tax, payout and dispute tooling around it. The 2025 FTC settlement is the reminder: whoever signs the sale answers for it.
Frequently Asked Questions
What does merchant of record mean?
The merchant of record is the legal entity that sells to the buyer: the name on the checkout, the receipt and the card statement. It collects and remits sales tax or VAT, handles refunds and chargebacks, and must follow consumer law for that sale, even when another company made the product.
What is the difference between a merchant of record and a payment facilitator?
A payment facilitator signs merchant agreements on behalf of an acquirer and settles funds to sub-merchants, which stay the sellers of record. A merchant of record is itself the seller: it resells the product under its own name and owes the taxes and the disputes.
Is a marketplace the merchant of record?
Usually yes. Visa defines a marketplace as a platform that brings customers and sellers together under its own brand, contracts with the acquirer itself, issues the receipt in its name and handles refunds and disputes. Visa also caps any single retailer at $10 million in annual Visa volume and 10% of the marketplace’s total.
Who pays VAT or sales tax when a platform sells for others?
In the EU, marketplaces are deemed suppliers for imports up to €150 and for sales by non-EU sellers, declared through the OSS or IOSS. In the US, 45 states and DC require marketplace facilitators to collect sales tax for their sellers, generally above a $100,000 economic-nexus threshold.
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.
