Understanding Merchant of Record and Paddle Overview

When selling software or subscriptions globally, processing payments is only the first step. You must also calculate, collect, and remit local sales tax or VAT in dozens of different countries. Let us learn about Paddle and the Merchant of Record model.

1. What is a Merchant of Record?

A Merchant of Record (MoR) is a legal entity authorized and held liable by financial institutions to process consumer credit card and digital wallet transactions on behalf of software companies.

When you sell via Paddle:

1. The customer pays Paddle.
2. Paddle acts as the seller of record, generating a tax-compliant invoice for the customer.
3. Paddle calculates and remits local sales tax (like VAT in the UK/EU or sales tax in US states) to tax authorities.
4. Paddle pays you the remaining balance minus their processing fee.

2. Why Choose Paddle for Global Sales?

• No Sales Tax Liability: You do not have to register for VAT in foreign jurisdictions or hire international accountants.
• Built-in Billing Support: Handles credit cards, PayPal, Apple Pay, Google Pay, and wire transfers through a single integration.
• Chargeback Protection: Paddle manages fraud prevention and handles consumer refund disputes directly.

3. Auditing and Site Compliance Checklist

Before Paddle will approve your production payouts account, your website must display:

• Compelling product terms of service and refund policies.
• A clear support contact email address.
• Pricing plans with no hidden charges.
• The company official name and physical registration address.