Merchant of Record (MoR) Explained Simply and Why SaaS Companies Need It

If you are building a SaaS product and selling to customers across the world, payments are not just about charging a credit card.

They are about tax, compliance, refunds, disputes, and legal responsibility.

This is where the concept of Merchant of Record (MoR) becomes critical.

Let’s break it down in simple words.

What Is a Merchant of Record (MoR)?

A Merchant of Record is the company that is legally responsible for a transaction.

That includes:

• Collecting payments

• Charging sales tax or VAT

• Filing and remitting taxes to governments

• Handling refunds and chargebacks

• Managing compliance and payment disputes

In short, the MoR is the entity the government and payment networks see as the seller.

The Problem SaaS Companies Face When Selling Globally

Imagine this scenario.

You have a SaaS company registered in the United States.

Your customers are in:

• Europe

• UK

• Australia

• India

• Canada

• And more

The moment you sell software in these regions, you may be required to:

• Register for VAT or GST

• Collect country-specific taxes

• File tax returns regularly

• Handle local payment regulations

• Respond to disputes under local laws

This quickly becomes a legal and operational nightmare.

For an early-stage or mid-sized SaaS, this is not where you want to spend time or money.

Why Registering in Every Country Is Not Practical

Without a Merchant of Record, you become the Seller of Record (SoR) everywhere you sell.

That means:

• Multiple tax registrations

• Local compliance expertise

• Accounting complexity

• High legal costs

• Risk of penalties if something is missed

For most SaaS companies, especially early on, this is simply not feasible.

This Is Where a Merchant of Record Helps

A Merchant of Record acts as a reseller of your SaaS in other countries.

Instead of you selling directly in every region, the MoR sells on your behalf.

They:

• Charge the customer

• Collect and remit taxes

• Handle refunds and disputes

• Stay compliant with local laws

You:

• Focus on building your product

• Own the customer relationship

• Control pricing and plans

• Receive payouts from the MoR

Real-World Examples of MoR Platforms

Several companies specialize in this model.

Examples include:

• Polar

• Dodo Payments

• Paddle

If you have ever seen Paddle on your credit card statement and wondered why, this is why.

The SaaS you subscribed to is the Seller of Record, but Paddle is the Merchant of Record billing you on their behalf.

MoR vs Seller of Record (SoR)

Here is the simplest way to understand the difference.

Seller of Record (SoR)

• Owns the product

• Sets pricing and plans

• Manages the customer relationship

Merchant of Record (MoR)

• Processes the transaction

• Handles taxes and compliance

• Takes legal responsibility for the sale

Both work together, but they handle very different responsibilities.

Why SaaS Companies Choose a Merchant of Record

SaaS founders use a MoR because it allows them to:

• Sell globally from day one

• Avoid registering for tax in dozens of countries

• Reduce legal and accounting risk

• Handle VAT, GST, and sales tax automatically

• Focus engineering and product time where it matters

For many SaaS businesses, MoR is not a convenience.

It is a growth enabler.

When You Should Consider Using a MoR

A Merchant of Record makes sense if:

• You sell to customers in multiple countries

• You do not want to manage global tax compliance

• You are early-stage or lean

• You want predictable operations without legal overhead

If global sales are part of your roadmap, MoR is almost always the right choice.

Final Thought

Most SaaS companies do not fail because of product or demand.

They fail because operations become too complex too early.

A Merchant of Record simplifies one of the hardest parts of running a global SaaS: getting paid legally, everywhere.

By offloading tax and compliance to a MoR, you buy yourself time to do what matters most.

Build the product.

Serve your customers.

Grow without friction.