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

A payment gateway only moves the money: you stay the seller, so sales tax, VAT, refunds and chargebacks remain yours. A merchant of record sells your product to the customer in its own name, collects and pays the tax in the buyer's country, deals with disputes and pays you what's left, and it takes a bigger cut of each sale for that work. Which one you need depends less on the fee than on where your customers live, whether they are people or companies, and what you sell.

The real difference: whose name is on the sale

Every online sale has a seller in the legal sense: the business the customer actually bought from. That business is the merchant of record. Its name is on the receipt and on the customer's card statement, and it's the one the tax office and the customer's bank deal with.

With a payment gateway, the merchant of record is you. The gateway is a pipe: it takes the card details on your checkout page, passes them to the banks and brings back a yes or a no.

With a merchant of record (MoR for short), the customer buys from the MoR, and the MoR then pays you. It works the way an app store does: your receipt comes from the store, not from the developer who made the app.

Here is the same sale both ways. A developer in Canada sells a $10-a-month app, and a new subscriber signs up from Berlin:

• Through a gateway. The developer's own company sells the subscription, so it has to add German VAT of 19% and file it with EU tax authorities itself. If the subscriber later disputes a charge with their bank, the dispute lands on the developer.
• Through a merchant of record. The MoR sells the subscription, adds the VAT, files it and answers the bank if there's a dispute. The developer gets a payout with the MoR's fee already taken off.

Everything else in the comparison follows from that one switch. The seller's role carries five things with it:

• Tax in the buyer's country. Sales tax, VAT and GST are owed by whoever sells.
• Refunds and chargebacks. A chargeback is when the customer's bank pulls a card payment back; the bank sends it to the seller.
• The name the customer sees. It appears at checkout, on the receipt and on the bank statement.
• The terms of sale. The refund policy and the buyer's consumer rights are the seller's to honour.
• What can be sold. A MoR takes on your risk, so it decides which products it is willing to resell.

Gateway, processor, merchant account: the parts of a setup where you stay the seller

When you sell on your own behalf, card money passes through three parts. People mix the names up, so here is what each one does:

• Payment gateway. The software at checkout that takes the card details, protects them and sends them on for approval.
• Payment processor. The company that moves the money between the card network, the customer's bank and your bank.
• Merchant account. A special account at an acquiring bank (the bank that accepts card payments for businesses) where card money lands before it reaches your ordinary account. Because that bank is on the hook if your customers file chargebacks, it checks your business before opening one.

So the difference between a merchant account and a payment gateway is simple. The merchant account holds the money; the gateway carries the card data that gets the money there. A gateway with no merchant account behind it has nowhere to put the payment.

Payment facilitators, companies that sign small businesses up under their own bank arrangements, bundle all three. You open one account, and the company acts as gateway, processor and merchant account at once. That saves a lot of setup, but it doesn't change who sells: with a standard facilitator account, the merchant of record is still your business.

A payment processor is no different from a gateway in this comparison: it never owns the sale, however much of the money flow it handles. Crypto has its own version of this setup, the crypto merchant account, where a processor collects coin payments into a balance it keeps for you.

Is Stripe a merchant of record?

Not by default. With an ordinary Stripe account, Stripe processes the payments and your business remains the seller.

The exception is a product called Managed Payments. With it, Stripe becomes the merchant of record and takes the seller's work off your hands, with tax filed in more than 80 countries. As of October 2026, it comes with conditions:

• Digital products only. Software, games, e-books, online courses and website hosting qualify. Physical goods, consulting, design or development work, in-person events and anything with live human involvement, such as one-to-one coaching, do not.
• Your business in a supported country. That means the US, Canada, every EU country, the UK, Switzerland, Norway, Liechtenstein, Australia, Hong Kong, Japan and Singapore.
• Customers outside a blocklist. Buyers in China, Cuba, Iran, North Korea, Russia, Syria and a few other places can't pay through it.
• A higher price. Stripe charges 3.5% per Managed Payments transaction on top of its usual payment fees.
• Stripe's checkout and Stripe's name. It works only through Stripe Checkout or Payment Links, without your own domain, and the customer's statement shows LINK.COM before your business name.

If your business is registered outside that list of countries, Managed Payments is off the table. If regular Stripe doesn't open accounts in your country either, here's how to get paid when Stripe isn't available in your country.

How taxes differ between a merchant of record and a payment gateway

Tax is the part of the seller's role that weighs most once you sell abroad. Here it means indirect tax: sales tax, VAT or GST, added to the price and owed in the buyer's country. With a gateway, that tax is your job. With a merchant of record, it's the MoR's job in every country it covers.

Selling digital products to consumers abroad puts you under rules like these (as of October 2026):

• European Union. VAT is charged at the rate of the customer's country. A business based outside the EU gets no threshold: VAT is due from the very first sale to an EU consumer. It can report all EU countries through one registration, the non-Union One Stop Shop, with one quarterly return. A business based inside the EU charges its home VAT until its cross-border sales to consumers pass €10,000 a year.
• United Kingdom. A business based outside the UK that sells digital services to UK consumers must register for UK VAT whatever its turnover. The £90,000 threshold applies only to UK businesses.
• United States. There is no federal sales tax; each state sets its own. Since the Supreme Court's 2018 ruling in South Dakota v. Wayfair, a state can require a seller with no presence there to collect tax once sales into the state pass a threshold. South Dakota's is $100,000 of sales a year. Whether software or digital downloads are taxed at all differs from state to state.

With a merchant of record, all of that becomes the MoR's paperwork. Before signing, check the list of countries it covers: where it doesn't handle the tax, the obligation can fall back on you.

Selling to companies changes the picture. In the EU and the UK, when you sell a service to a VAT-registered business, the buyer usually accounts for the VAT itself under the reverse charge rule (as of October 2026). If most of your customers are businesses, a merchant of record solves a much smaller problem than it does for an app sold to the public.

What a merchant of record costs compared with a gateway

Per sale, a gateway looks cheaper, while a MoR's fee includes the tax work. Here are list prices as of October 2026.

Services where you stay the seller:

• CryptumPay (crypto payments). 1% per successful payment, down to 0.5% at higher volumes, and the fee can be passed on to the customer.
• Stripe (cards). 2.9% + 30¢ per successful US domestic card payment, plus 1.5% for international cards and another 1% if currency conversion is needed.
• Authorize.net (gateway only). $25 a month, 10¢ per transaction and a 10¢ daily batch fee, for businesses that already have a merchant account.

Merchants of record:

• Paddle. 5% + 50¢ per checkout transaction, with no monthly fee.
• Lemon Squeezy. 5% + 50¢ per transaction, with small extra fees on some transactions made outside the US.
• Stripe Managed Payments. 3.5% on top of Stripe's regular payment fees.
• FastSpring. A custom quote: it takes a share of revenue that depends on your volume.

Now take a $50 sale. Paid with a US card to a US seller through Stripe, it costs $1.75 in fees; Paddle's list price on the same sale is $3.00. Paid with a foreign card that needs currency conversion, the Stripe fee grows to 5.4% + 30¢, which is also $3.00. So on sales abroad the gap in fees can close completely, and the MoR does the tax on top.

The part of a gateway's cost that isn't on any price list is the tax work. Selling abroad on your own, you pay for:

• A tool that calculates the tax. Stripe Tax, for example, charges 0.5% per transaction where you're registered to collect tax, on its pay-as-you-go plan with a no-code setup such as Stripe Checkout or Payment Links. That plan calculates and collects the tax but doesn't file returns.
• Registrations. Each country or state where you owe tax needs one.
• Returns. Each registration comes with its own filings, often quarterly.
• An accountant. Someone has to know foreign VAT and US sales tax well enough to check it all.

The downsides of each, before you choose

A payment gateway leaves you with:

• Tax paperwork in every country you sell into. Each new market can mean another registration and another return.
• Disputes and fraud. Every chargeback is yours to answer, and card processors charge a fee for each one on top of the money the customer gets back.
• Your own risk with the processor. If a processor sees too many disputes or something it doesn't like, it can hold your money while it reviews the account.

If chargebacks are what pushes you towards a MoR, it's worth first checking what a chargeback actually costs a merchant and how to get fewer of them.

A merchant of record costs you:

• A larger cut. You pay for the tax and dispute work on every sale, including the domestic ones you could handle fine yourself.
• Your name in second place. Customers see the MoR on the receipt and the statement, which can confuse someone who doesn't recognise the charge.
• A narrower list of what you can sell. The merchants of record above are built for digital products such as software, courses and downloads. Physical goods and services done by people generally fall outside.
• Less control. The MoR sets the checkout, the payout schedule and part of the refund policy. Some will refund a customer themselves if you don't answer their support team in time.
• Disputes that can still cost money. A MoR answers disputes for you, but some still pass the dispute fee on to your balance.

Which one do you need?

The choice comes down to who buys from you, where they are and what you sell. The common situations:

• You sell software, courses or downloads to the public in many countries, and your team is small. A merchant of record is worth its fee: it replaces tax registrations in many countries with one contract.
• Most of your buyers are businesses. A gateway is usually enough, because the reverse charge leaves much of the VAT with the buyer.
• Most of your customers are in your own country. A gateway is cheaper, and you only have your home tax rules to follow.
• You sell physical goods or your own time. A gateway, because MoR services built for software won't take those sales.
• Your business or your customers are outside the MoR's map. A gateway or a crypto processor, because the MoR simply won't serve those sales.

For a SaaS, the answer can also change with size: a MoR while the team is small, its own processor once sales are big enough to pay for in-house tax work. If that's where you are, see which payment processing a SaaS should use when customers are in different countries.

Where crypto payments fit

A crypto payment processor sits on the gateway side of this comparison. It takes the coins and passes the money on to you, but you remain the seller, and the tax rules above apply to you just as they would with a card gateway.

There is one big difference from cards. A crypto transfer can't be pulled back by a bank, so there are no chargebacks. A refund happens only when the seller decides to send the money back.

So the dispute fees and the account holds that follow a run of chargebacks, both from the downside list above, don't arise. The flip side is that a customer has no bank to complain to, which makes a clear refund policy on your site matter more.

Crypto can also run next to a card gateway or a MoR, for customers who prefer coins or can't pay by card, as long as your MoR contract allows other payment methods alongside it. The tax side is the same as with any gateway: the sale is yours, and so is the reporting. If you're new to the idea, start with how a crypto payment gateway works and helps a business accept cryptocurrency.

CryptumPay is a crypto payment processing service of this kind. It handles the transactions, while complying with tax rules and the law stays with the seller. Its terms:

• Fee. 1% per successful payment, down to 0.5% at higher volumes; the seller can pass the fee on to the customer.
• Balance in USDT. Whatever coin the customer pays with, CryptumPay converts the payment to USDT as soon as it arrives, so the balance never sits in a volatile coin.
• Withdrawal. At any time, with no minimum, to the address the seller specifies.
• Refunds. The seller decides whether to give money back and can refund a customer by paying out to their address from the CryptumPay balance.
• Verification. Identity verification (KYC) is mandatory for every seller, and withdrawals aren't possible without it. Company documents may not be needed. The project is reviewed together with the identity check, usually within one business day.

More about the service is on the CryptumPay home page.

In short

A payment gateway carries the money and leaves the sale, the tax and the disputes with you. A merchant of record takes all three for a larger cut. If you sell digital products to the public in many countries, that cut usually buys you time and safety. If you sell to businesses, at home, or things a MoR won't resell, a gateway, card or crypto, is the simpler and cheaper road.

FAQ

Which merchant of record is best for digital products?

There is no single best one; the best for you is the one that files tax in every country where your customers are. A service with that coverage and a slightly higher fee is better value than a cheaper one that leaves gaps you have to file yourself. Only after that does the fee on your average sale decide.

Do my taxes change if I use a merchant of record instead of a payment gateway?

Only the tax added to the price changes hands: the sales tax and VAT in the buyer's country become the merchant of record's job. Your income tax stays where it was. The payouts you receive are your business income, taxed in your own country under its rules, with either setup.

Is a merchant of record worth it for a small business?

Often yes, if you sell digital products to consumers abroad. The two MoRs with flat public prices in the list above charge per sale with no monthly fee, so a small seller pays nothing until money comes in. If your sales are mostly domestic or to companies, the extra percentage buys little you couldn't handle yourself.

This article is general information, not legal or tax advice. Tax rules change and depend on where you and your customers are; check them with a qualified adviser before you choose a setup.