Whose sale was it? Merchant of record versus marketplace facilitator

A merchant of record buys from you

Paddle, Lemon Squeezy, Polar, Gumroad and the app stores all work the same way. You make one wholesale supply to their entity. They make the retail supply to your customer. Two sales, and only the first one is yours.

So when a customer in Texas buys your product through Paddle, the sale into Texas was Paddle's. None of it lands on your side of a Texas threshold, because as far as Texas is concerned you did not sell into Texas at all.

A marketplace facilitator collects on your behalf

Amazon, Etsy and eBay are not buying your inventory. You are still the seller. What the marketplace facilitator laws did, state by state after 2018, was move the duty to collect and remit the tax onto the platform.

That is a narrower change than it sounds. The tax on those orders stops being your problem to compute or pay. Your status as the seller does not change, and the threshold question is asked about the seller.

Merchant of record: no threshold, anywhere

There is no jurisdiction in which a merchant-of-record sale counts toward the underlying seller's registration threshold. Not a US state, not the EU, not the UK. Somebody else made the supply into that market, and that ends the analysis.

This is why a seller running everything through Paddle can pass a million dollars of consumer revenue and owe no registration outside their home country. It is also why that seller's own direct sales are so easy to lose sight of.

Marketplace: the US states split roughly two to one

Here the states divide, and they divide on a question that has nothing to do with who remitted the tax: does a sale the marketplace collected on still count toward your economic-nexus measurement?

Fourteen of the forty-eight US jurisdictions running an economic-nexus test exclude them. The other thirty-four count them, and nine of those thirty-four count by default rather than by a settled answer, because no state material resolves it either way.

VAT and GST: a marketplace sale never counts

Outside the US the answer is uniform, and it runs the other way. EU and UK deemed-supplier rules treat the platform as having made the supply, so the sale is not yours for VAT purposes and cannot move you toward a registration threshold.

Australia and Canada arrive in the same place by their own routes. A seller with heavy marketplace volume into Europe can therefore be nowhere near an EU registration while being well past a US state line on the very same orders.

Counting and registering come apart

In several states that do count facilitated sales toward your threshold, a seller whose sales all run through a collecting marketplace is nonetheless excused from registering. Nebraska, Nevada, New Jersey, South Dakota, Washington and Wisconsin each have a version of this.

The practical effect is that a dashboard can correctly show you over the line in Washington while you owe Washington nothing and file nothing there. Make one direct sale into the state and that stops being true.

Where the tooling gets it wrong

A payment processor sees its own sales and nothing else. An accounting tool sees deposits. Neither can tell a wholesale supply to Paddle apart from a retail sale to a customer in Berlin, because on a bank statement the two look identical.

Adding it all into one pile produces two errors at once: a Paddle seller warned to register for VAT the platform already handles, and a genuinely exposed direct sale buried inside platform volume that carries no exposure whatsoever.

In order

1. 1Split every source into one of three bucketsFor each place money arrives, decide whether you were the seller, a marketplace collected for you, or a merchant of record bought from you. Most businesses have at least two of the three and have never written it down anywhere.
2. 2Read the terms your customer acceptedWhoever is named as the seller there settles it. If the platform's entity is the counterparty to your customer, it is a merchant of record, and those sales leave your threshold arithmetic entirely.
3. 3Set the merchant-of-record volume aside without deleting itYou still want that number, because it is the gap between the revenue you report and the revenue that creates registration duties. Throwing it away makes the difference look like a reconciliation error six months later.
4. 4Check the marketplace states one at a timeThere is no single answer to carry across the country. For each state where marketplace volume is material, ask whether that state counts it, and whether its exclusion depends on the facilitator being registered.
5. 5Track your direct sales on their ownThis is the stream that actually creates obligations. In a state that excuses you while everything runs through a marketplace, the first direct sale can put you over the line on day one.