Merchant of record vs Stripe: fees, tax and lock-in for selling software globally (2026)

If you sell software to people in lots of countries, you have two ways to get paid. You can use a merchant of record (MoR) such as Paddle, Lemon Squeezy, Polar or Stripe Managed Payments, which legally resells your product and deals with sales tax, VAT, GST and chargebacks for a fee of about 5% plus 50 US cents. Or you can be your own merchant on Stripe and add Stripe Billing and Stripe Tax, which is cheaper per sale but leaves every tax registration, filing and dispute with you.

The short version: an MoR buys you simplicity when you sell to consumers in many countries. Being your own merchant pays off when you sell to businesses, invoice them, or have the volume to justify a tax workflow.

What a merchant of record actually does

A merchant of record is the business your customer legally buys from. Your customer pays the MoR, the MoR pays you, and you're its supplier.

That shift matters because the seller carries the tax. Stripe's own docs put it plainly: with Managed Payments the merchant of record is Stripe, and it calculates tax, collects it, then "files and remits payments to the relevant tax authorities" for sales in more than 80 countries. Where it doesn't cover a country, the same page says you remain responsible. It also handles fraud, disputes and transaction-level customer support. Paddle's pricing page lists global tax compliance, fraud protection, chargeback handling and buyer support as included in its rate.

What your customer sees changes too. With Stripe Managed Payments the buyer sees Link as the merchant, the receipt says "Sold through Link", and the card statement reads LINK.COM* followed by your descriptor (Stripe docs).

What an MoR doesn't do: your income tax. You still pay tax on what it pays out to you, wherever you or your company are tax resident.

Being your own merchant with Stripe

Being your own merchant means your company is the seller, so every tax obligation from every sale is yours. Stripe processes the card, and you bolt on tools to manage the rest.

Stripe Tax calculates tax and tracks your sales against registration thresholds, but it doesn't make you compliant on its own. Stripe's filing docs say you must file and remit the tax you collect in every location where you're registered, and that registration and filing are separate services. Its "Register for me" option doesn't prepare returns or remit tax. Automated filing through Stripe covers the US and selected registrations in Ireland (non-Union OSS) and Canada, and partners such as Taxually and Marosa cover other regions at their own prices.

In return you get the lowest per-transaction cost, full control of your checkout and invoices, and your own name on the customer's statement.

Fees compared (checked 25 October 2026)

The headline rates differ less than they look once you add what each one includes. All figures are from each company's own pricing page or fee docs on 25 October 2026, in US dollars. Stripe's figures are from its US pricing page, and Stripe prices differ by country.

Sources: Paddle, Lemon Squeezy pricing and fees, Polar fees, FastSpring, Stripe.

Payout and currency conversion fees

Payout fees are where the totals drift. Lemon Squeezy's fee docs list free Stripe payouts to US bank accounts, 1% per payout to bank accounts outside the US, US$0.50 per PayPal payout in the US, and 3% capped at US$30 per PayPal payout elsewhere. It says its platform fee already covers currency conversion on the sale.

Polar passes on Stripe's payout costs without markup: US$2 for each month with active payouts, 0.25% + 25 cents per payout, and cross-border conversion of 0.25% in the EU up to 1% in other countries (Polar fees). Polar also keeps its transaction fees when you refund.

Paddle's pricing page lists no separate payout or conversion fees and says there are "No monthly fees, migration fees, or hidden extras." Stripe's US page says payouts on its standard schedule are free, with instant payouts at 1.5% (minimum 50 cents).

A worked example

Take a US$50 monthly subscription paid by card. These are fee estimates from the rates above, before payout costs and before any tax.

• Stripe, own merchant, US customer: 2.9% + 30c (US$1.75), Billing (US$0.35) and Tax Basic (US$0.25) is about US$2.35. Add US$0.75 for a non-US card, US$0.50 more if currency conversion applies, and the cost of filing returns.
• Paddle, any customer: US$3.00.
• Lemon Squeezy: US$3.25 for a US customer, US$4.00 for a non-US customer.
• Polar Starter: US$3.00 for a US card, US$3.75 for a non-US card.
• Stripe Managed Payments: US$1.75 in payment fees plus 3.5% (US$1.75) is US$3.50, plus Billing if you use subscriptions, before any international or conversion surcharge.

So the MoR premium on a US$50 sale is roughly 65 cents to US$1.50. The real question is whether that's cheaper than the registrations, returns and adviser time you'd otherwise pay for.

Lemon Squeezy and Stripe Managed Payments

Lemon Squeezy is now owned by Stripe and is pointing its users towards Stripe's own MoR. Its January 2026 update notes Stripe acquired it in 2024, admits "slower support responses and less frequent product updates", and says "Our goal is to provide Lemon Squeezy users an easy way to migrate to Stripe Managed Payments." It doesn't announce a shutdown or give a migration date. Its pricing page footer now reads "Sold through Link, LLC f/k/a Lemon Squeezy LLC".

Stripe Managed Payments is live with real limits. Its eligibility page lists 37 business locations: Canada, the US, 31 European countries (including the UK), and Australia, Hong Kong, Japan and Singapore. It only covers fully automated digital products such as software, SaaS, digital media and online courses. Consulting, design, development, physical goods and live events don't qualify, and nor does anything sold through a platform or marketplace.

It also only works with Stripe Checkout and Payment Links, with no custom domains on the checkout, no one-off invoices and no Stripe Connect (how it works). If Stripe needs product input on a support case and you don't reply within 48 hours, Stripe might refund the customer without your approval.

The tax you take on as your own merchant

As your own merchant, every country and state where your customers are can create a tax registration. These are the four most founders hit first.

EU VAT on digital services

If you're outside the EU and sell digital services to EU consumers, the VAT is due in the customer's country. The European Commission's One Stop Shop page says the non-Union scheme is for businesses that haven't established their business in the EU and covers "supplies of services to non-taxable persons taking place in any Member State". You register in one Member State and file one VAT return quarterly. The OSS has applied since 1 July 2021, replacing the MOSS that started in 2015.

The EUR 10,000 threshold on the same page works by keeping the place of supply in the supplier's own Member State, so it helps small EU-based sellers. It's not a free pass for a seller outside the EU.

UK VAT on digital services to consumers

There's no threshold for an overseas seller. HMRC's digital services guidance says supplies of digital services to UK consumers are liable to UK VAT, and a business outside the UK making them must register. GOV.UK's registration page confirms a non-UK business supplying the UK must register "regardless of taxable turnover". The £90,000 threshold on that page is for UK-established businesses.

Australian GST for offshore sellers

Australia gives offshore sellers a threshold. The ATO's guide for non-residents sets the registration turnover threshold at A$75,000 (A$150,000 for non-profits), with GST at 10%. Sales of digital products to Australian businesses registered for GST don't count towards that turnover, so check each customer's ABN and GST status. Non-residents can use the simplified GST system.

US sales tax and economic nexus

US states can tax you without you ever setting foot there. In South Dakota v. Wayfair, decided 21 June 2018, the Supreme Court held that the physical presence rule of Quill was "unsound and incorrect" and overruled it. South Dakota's law applied to sellers delivering more than US$100,000 of goods or services into the state, or 200 or more separate transactions, a year.

Each state now sets its own threshold and decides whether software and SaaS are taxable. Texas, for example, says remote sellers with less than US$500,000 of Texas revenue in the preceding twelve calendar months don't need a permit (Texas Comptroller). Stripe Tax's threshold monitoring helps you see when you cross one, but registering and filing is still on you.

Who each route fits

The right answer depends on who buys and how they pay.

• Early SaaS selling to consumers worldwide. An MoR is usually the better start. One fee covers the registrations and returns you'd otherwise need, including UK VAT from the first consumer sale, and you can spend your time on finding customers instead of tax portals.
• B2B SaaS with invoices. Being your own merchant on Stripe often fits better. Business buyers want invoices in your company's name, purchase orders and bank transfers, and Stripe Managed Payments doesn't support one-off invoices or the hosted invoice page. Paddle does list invoicing on its pricing page, with no published price.
• Founders in countries Stripe doesn't support. Stripe's global page lists India and Indonesia as preview only. Polar says sellers in its supported countries, which include India and Indonesia, can receive payouts "even if Stripe standalone is invite-only there". The other route is a company where Stripe is open: see US LLC for non-US founders. For anything Bali-specific, Bali Startup & Tech covers it.
• Marketplaces. Most MoRs are built for one seller's own products. Stripe Managed Payments excludes Connect platforms and products sold through a marketplace, so a marketplace usually needs its own merchant setup and tax advice on its role as a platform. The UK, for one, can make a digital platform liable for the VAT on third-party sales (HMRC).

Switching costs and lock-in

Moving between providers is possible, but it takes weeks and you need cooperation from the one you're leaving. Two things decide how painful it is: who holds the saved card details, and whether subscriptions can be recreated without asking customers to re-enter them.

Leaving Stripe. Stripe says customers own their data and it'll transfer card data to another processor, but only to a PCI DSS Level 1 compliant one. It exports card details, emails and metadata in an encrypted file. It doesn't export payment history or subscriptions, and cards saved through Link are excluded (Stripe docs).

Leaving Paddle. Paddle says it will transfer payment method details to your new provider's PCI-compliant vault "within 2 weeks" after security checks, and you export subscriber data from the dashboard. Its pricing FAQ says "your data is 100% yours", with no lock-in periods and no migration fees. Moving into Paddle takes a median of 12 days, per its migration guide.

Stripe Managed Payments. Customers buy through Link and manage orders there. If a customer asks for their data to be deleted, Stripe cancels their Managed Payments subscriptions and deletes their data from the related objects in your Stripe account (Stripe docs).

For Lemon Squeezy and Polar we didn't find a published card-export process when we checked, so ask before you commit, in writing. To compare notes on migrations like this with other founders, request an invite to Remote Builders.

Common mistakes

These are the errors that cost founders money or a frozen account.

• Comparing headline rates only. Stripe's 2.9% + 30c excludes Billing, Tax, international cards, conversion and filing.
• Assuming small means exempt. The UK has no threshold for overseas sellers of digital services to consumers.
• Treating Stripe Tax as compliance. It calculates and collects. Registration, filing and payment are still your job unless you pay for filing.
• Picking an MoR for services work. Stripe Managed Payments rejects consulting and anything with human delivery, so check each provider's eligibility rules first.
• Ignoring refund and dispute control. MoRs can refund buyers to cut disputes: Polar and Stripe both mention refunds within 60 days of purchase.
• Building on a product in transition. Lemon Squeezy's own update describes slower support while it moves users to Stripe. Factor that into a new build.
• Not planning the exit. Find out how you'd move saved cards and subscriptions before you have thousands of them.

Decision checklist

Work through these in order before you build your checkout.

1. List who buys: consumers, businesses, or both, and in which countries.
2. Check whether Stripe supports your company's country on its global page. If not, price an MoR that pays out to you, or a company elsewhere.
3. Check whether your product qualifies as a fully automated digital product. If it includes services, most MoRs are out.
4. Estimate fees at your real price point and customer mix with the table above, including international cards and payouts.
5. Add the cost of tax compliance if you're your own merchant: registrations (UK from the first consumer sale), OSS returns, Australian GST past A$75,000, and US states past their thresholds.
6. If you sell to businesses, confirm the provider can issue the invoices and payment terms your buyers need.
7. Ask how you'd leave: card data transfer, subscriber export and timelines.
8. Read the current pricing and eligibility pages on the day you sign up, because these change.