What does a merchant of record do?

A merchant of record takes full legal responsibility for selling goods to customers. It processes payments, handles refunds and disputes, and calculates, collects, and pays sales tax and VAT to local tax authorities.

Is Stripe a merchant of record?

By default, Stripe is a payment processor, not a merchant of record. You remain the seller of record. However, in February 2026 Stripe announced Stripe Managed Payments, its own merchant of record product built by the Lemon Squeezy team.

Does a merchant of record pay sales tax for you?

Yes. The merchant of record is the legal seller on paper. It calculates the correct sales tax or VAT at checkout, collects it from the buyer, and sends the money directly to the tax office.

What is the difference between a merchant of record and a payment gateway?

A payment gateway only moves money from the buyer to your account, leaving tax filing to you. A merchant of record takes the payment under its own name and manages all sales taxes, VAT, and financial compliance.

What is a merchant of record?

Updated 27 September 2026

The short answer

A merchant of record is the legal entity that sells a product to the buyer. When a customer buys from your online shop, the merchant of record takes the payment, handles the sales tax or VAT, and deals with refunds. You make the item, but they take on the legal duties of the sale.

This setup keeps you from having to file taxes in every country where you have customers. The service sells the product to the buyer for you.

Why sales tax and VAT matter

When you sell digital goods online, buyers can come from anywhere. Different countries and states have different tax rules. In Europe and the United Kingdom, sellers must handle value-added tax, also called VAT. In the United States, states have different sales tax rules.

Keeping up with these rules takes time. If you do it on your own, you must register in each place, collect the money, and file tax returns. A merchant of record takes care of all those steps so you can focus on creating.

Payment processor versus merchant of record

It helps to know how a payment processor is different from a merchant of record. A tool like Stripe is a payment processor. It moves money between banks, but it does not give you product pages, file delivery, or tax handling by default. With Stripe, you are the seller of record.

Because you are the seller of record, you are legally responsible for taxes and chargebacks. A merchant of record takes that legal spot instead. Their name shows on the customer receipt and bank statement, and they take on the legal liability.

Examples of merchant of record platforms

A clear example is Lemon Squeezy. It is a merchant of record for software and digital products, and it handles sales tax and VAT. Stripe bought Lemon Squeezy in July 2024. In February 2026, Stripe announced Stripe Managed Payments, its own merchant of record product, and the Lemon Squeezy team is building it.

Gumroad is another example. It started in 2011 in San Francisco. Gumroad became a merchant of record on January 1, 2025, so it collects and pays sales tax and VAT. Buyers do not need an account to buy there. For exact costs on these platforms, check their pricing page for current numbers.

When you need a merchant of record

You should consider a merchant of record if you sell digital downloads across borders and do not want to manage tax registrations. It saves hours of tax filing and keeps your business compliant with foreign rules.

On the other hand, some sellers prefer a direct setup for digital files. If you run your shop on Whop, you can add MKKT. With this Whop app, sellers upload a file, set a price or make it free, and get a store link buyers can use without a Whop account.