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Merchant of record, or watch your own thresholds?
This is the honest version of a comparison we would rather not write, because for a large number of sellers the merchant of record is the right answer and this product is not needed. If you sell digital products to consumers worldwide and the thought of registering for VAT anywhere makes you want to close the laptop, use one. Paddle, Lemon Squeezy and Polar become the seller, take the registrations onto their own account, and remit. That is a genuinely complete solution to the problem this product only watches.
It stops being the right answer at three points: when the percentage starts to cost more than compliance would, when what you sell or how you bill does not fit an MoR at all, and when an MoR covers one of your channels but not the others. The last one is the trap, because it looks like coverage.
What is a merchant of record?
A merchant of record sells to your customer on your behalf, so VAT and GST registration is theirs rather than yours, in exchange for a percentage of every sale. Paddle, Lemon Squeezy and Polar work this way. The trade is fees and control for compliance you no longer have to run.
| TaxesRadar | A merchant of record | |
|---|---|---|
| Who is registered for VAT and GST | You, in the places you have crossed | Them, everywhere they operate |
| Cost | 12 USD a month, flat | A share of every sale, typically around 5% |
| Cost at 500,000 USD of annual revenue | 348 USD a year plus what registrations you actually need | Roughly 25,000 USD a year in fees |
| Works for physical goods | ✓ | Rarely, most are digital-only |
| Works for B2B invoicing on net terms | ✓ | Limited, checkout-shaped billing |
| Works for marketplace payouts to your own sellers | ✓ | No, a different model entirely |
| You keep the customer relationship and the data | ✓ | Partly, they are the seller of record |
| You keep your own processor rates and payout timing | ✓ | ✕ |
| Covers sales taken outside that platform | Yes, every source in one total | No, only what goes through them |
| Removes US economic-nexus registration duty | We track it, you register where you cross | No, those sales still count toward your own state thresholds |
| Tells you where you stand before you owe anything | ✓ | Not their job, they are already handling it |
| Switching cost later | Cancel, keep everything | Re-platform checkout and subscriptions |
The honest verdict
Sell digital products to consumers, mostly through one checkout, at a revenue where five percent is cheaper than the work it replaces: use a merchant of record and do not buy this. Sell physical goods, invoice businesses, run a marketplace, take money through more than one route, or reach the volume where the percentage outgrows the cost of registering: then somebody has to watch the lines, and that is what this is. The two are not exclusive either. Plenty of sellers run an MoR for consumer checkout and still owe US registrations on their direct sales, which is exactly the case nobody is covering for them.
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FAQ
If I use Paddle, do I still need to watch tax thresholds?
For EU and UK VAT, no: under the deemed-supplier rules Paddle made that supply, so those sales create no registration duty for you. For US sales tax, yes. Economic nexus asks how much you sold into a state, and marketplace and merchant-of-record sales are still sales into the state. You can be a Paddle-only seller and still owe registration in Texas.
At what revenue does a merchant of record stop being worth it?
Compare the fee against the cost of the registrations you would actually need, not against all of them. At 100,000 USD a year, around 5,000 USD in fees buys you a lot of not thinking about it. At 1,000,000 USD, roughly 50,000 USD a year buys the same thing, and an accountant filing four returns costs a fraction of that. The crossover is usually somewhere in between and depends on how many jurisdictions you genuinely trip.
Can I use a merchant of record for some sales and not others?
Yes, and many sellers already do without deciding to: consumer checkout through an MoR, enterprise deals invoiced directly, one marketplace on the side. That is the case this product is built for. Sales sorted by who the seller was, so the MoR ones stay out of your VAT thresholds while your direct ones are counted properly toward everything.
Does a merchant of record handle my home-country tax?
No. They handle the tax on the sales they make as seller. Your own corporate tax, your local VAT registration if you have one, and any obligation arising where your business is established remain yours. That is worth checking before assuming the compliance question is fully answered.
Read further
- Every threshold, with its official sourceThe figure, what it measures, the window it is measured over, and the authority that publishes it. No account, no email.
- TaxJar raised its prices. Work out which half you were paying forTaxJar now publishes 39 USD a month for Starter and 50 to 55 USD a filing. Here is how to work out whether you were paying for filing or for watching.
- We counted the wrong sales in 42 statesOur engine measured US economic nexus on taxable sales in every state. Only six do. The error, the fix, and how to tell which one applies to you.
- The countries where your first sale is the registrationFourteen countries apply no VAT registration threshold to foreign sellers: the duty starts at sale one. Where they are, and who the published figure belongs to.
- Whose sale was it? Merchant of record versus marketplace facilitatorA merchant of record sale counts toward no threshold anywhere. A marketplace sale leaves you the seller, and most US states still count it toward your own line.
- California starts taxing SaaS on 1 January 2027California SaaS sales tax starts 1 January 2027 under SB 122. Two things change at once: software becomes taxable, and it starts counting toward $500,000.
- The UK VAT registration threshold for overseas sellersThe UK VAT registration threshold is £90,000 - but only for businesses established in the UK. If yours is not, there is no threshold. Here is the real test.
- US economic nexus: what actually triggers it, state by stateThe $100,000-or-200-transactions rule describes 17 of 48 US jurisdictions. Which test your states really apply, the window they measure over, and what counts.
- EU OSS registration vs US sales tax nexusEU OSS registration and US economic nexus solve the same problem in opposite ways. Here is how each threshold works and what a global seller has to watch.
- What is the GST threshold for small businesses in Canada?The Canadian GST threshold is C$30,000 over four consecutive quarters. Here is what counts toward it, when non-resident sellers must register, and the traps.
Where these claims come from
Everything asserted above about A merchant of record is read from their own documentation, last checked 2026-08-06. If one of these is out of date, tell us and it gets corrected.
Comparison reflects our understanding as of 2026 and TaxesRadar's own positioning; verify current competitor features and pricing on their sites. A merchant of record is a trademark of its owner.