Should You Use Stripe or a Merchant of Record?

The core difference between Stripe and a merchant of record (MoR) is who is legally responsible for your sales. With Stripe, you are the merchant of record — you collect the payment, you are responsible for VAT and sales tax in every jurisdiction where you have customers, and you handle chargebacks and disputes. With an MoR like Paddle or Lemon Squeezy, the MoR is the legal seller — they collect, remit taxes, and absorb chargeback risk on your behalf.

The tax compliance problem Stripe does not solve

If you sell to customers in the EU, UK, Australia, or most other developed markets, you are legally required to collect and remit the appropriate sales tax or VAT on each transaction. In the EU alone, this means up to 27 different rates depending on the customer's country. Stripe does not file these taxes for you. You need either a specialist accountant, a tax automation service like TaxJar or Avalara, or a merchant of record who handles this entirely.

For a solo founder selling globally, tax compliance via Stripe is a significant ongoing administrative burden. It is also a meaningful financial risk — tax authorities in the EU have started pursuing software companies for back-taxes on digital sales.

When Stripe is the right choice

Stripe makes sense when you are primarily selling to US customers, when you have a technical co-founder who can integrate its APIs properly, or when you need granular control over your payment flows — custom checkout experiences, complex subscription logic, or usage-based billing that requires Stripe's full API surface. Stripe's ecosystem is also deeper: more third-party integrations, more payment methods, more developer tooling.

When a merchant of record is better

An MoR is better when you are selling globally from day one, when you are a non-technical founder who wants payment infrastructure that just works, or when you want to eliminate the risk and overhead of tax compliance. Paddle and Lemon Squeezy both handle EU VAT, UK VAT, Australian GST, and dozens of other jurisdictions automatically. The trade-off is a slightly higher fee (typically 3–5% compared to Stripe's 2.9%) and less control over the checkout experience.

Chargebacks and fraud

With Stripe, a chargeback is your problem. You lose the disputed amount plus a chargeback fee, and too many chargebacks can get your account terminated. With an MoR, the MoR absorbs the chargeback. For products that are at higher risk of friendly fraud — annual subscriptions, digital downloads, one-time purchases — this protection has real value.

Can you switch later?

Switching from Stripe to an MoR or vice versa is possible but disruptive — existing subscribers need to be migrated, and any long-term subscription logic needs to be rebuilt. It is easier to make the right choice at the start than to migrate later. If you are genuinely uncertain, start with an MoR: the slightly higher fee is a fair price for global compliance and zero tax overhead while you are validating your product.

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