What is a merchant of record (MoR)?

by Sarah Craig March 4, 2025

The term merchant of record (MoR) frequently comes up when a company is determining how to manage their sales tax compliance. However, an MoR’s responsibilities expand beyond tax compliance to multiple essential business functions. In this blog, we’ll explain what an MoR is, what they do, and the pros and cons of using an MoR for managing tax compliance.

Merchant of record, defined

An MoR is an entity that holds legal responsibility for processing customer payments on behalf of a business. Because the MoR is in charge of handling customer payments, it’s also accountable for the financial, legal, and compliance aspects of those transactions. Typically, an MoR collaborates with banks, card networks, and tax authorities at both the state and country levels.

While an MoR can manage tax compliance as part of their responsibilities, MoR is not terminology used in tax law. Instead, individual country tax authorities use their own terms to determine the party liable for tax collection, like marketplace facilitator or in countries outside of the US, deemed seller. Tax compliance varies based on the country and state – so businesses need to understand the definitions of all the different parties involved to be compliant.

Merchant of record responsibilities

Each MoR is different, but in general, an MoR is responsible for multiple components of a business financial transaction. Here are a few examples of activities an MoR manages:

Processing customer payments: An MoR manages all aspects of processing a customer’s payment, from ensuring the payment is accurate and secure, to managing refunds and chargebacks.

Regulatory compliance: An MoR ensures transactions are secure and legal, complying with a multitude of financial regulations, such as the Payment Card Industry Data Security Standards (PCI DSS). It is also responsible for adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Indirect tax management: As we mentioned above, an MoR is responsible for calculation, collection, and remittance of sales tax, value-added-tax (VAT), or goods and service tax (GST). While not all MoR manage indirect tax compliance, businesses can select an MoR that can manage the tax burden on their behalf, in addition to other MoR responsibilities.

Fraud prevention: An MoR also manages fraud prevention, ensuring the right systems are in place to detect fraudulent activity, protecting both the businesses and its customers.

One of the key benefits of an MoR is the time savings it provides a business. By managing all these different aspects, businesses can allocate more time to focusing on their core products or services, all while knowing their financial responsibilities are secure, legal, and compliant.

Pros and cons of using a merchant of record for indirect tax compliance

Maintaining tax compliance is tedious and complex work. With that in mind, using an MoR to manage tax compliance can save a business considerable time and effort ensuring they are properly compliant.

An MoR can be hugely beneficial for companies selling across multiple states or internationally. Because tax laws vary significantly depending on the state or country, an MoR can be advantageous for navigating complex tax landscapes, ensuring the business doesn’t have to worry about managing the complexity of cross border tax compliance.

On the other hand, the MoR model is not the right fit for every business. Because an MoR is likely over the tax threshold in more countries or states than the business (unless the business is sizable), MoR customers will have more tax obligations and need to collect tax from more of their customers. This is because the MoR is taking on the tax responsibilities for a multitude of businesses, with obligations to collect tax in many geographies. Given the amount of responsibilities they manage and assume, an MoR can also be a costly solution for businesses.

Additionally, when a business elects to use an MoR, they are allowing another company to be responsible for their business. The MoR model is not the right fit for a business that wants to maintain complete control over their financial functions.

Tax compliance software vs merchant of record for sales tax compliance

There are many different solutions on the market to manage tax compliance. When considering how to manage your tax obligations, ask yourself the following questions:

What challenges are we looking to address with a tax solution?
Do we want to outsource all our compliance needs or do we have the resources to do some work in-house?
Do we have internal resources to support implementing and adopting a tax solution or MoR?
In how many states or countries do we have tax obligations?
What is the budget for implementing a tool to support our compliance?
Which options have an existing integration (or the ability to create a custom integration) with our current systems?
Do we want to find a solution to manage our other financial processes as well?

Once you understand what your business is looking for in a solution, you can begin to narrow down your options. Here are a few companies that can help keep your business compliant, depending on your specific business needs:

TaxJar: TaxJar was acquired by Stripe in 2021, but continues to provide sales tax compliance support to over 20,000 businesses. Operating only in the US, TaxJar is a great fit for businesses with sales tax obligations that want to automate the entire compliance process, from sales tax registrations to filing and remittance. TaxJar is a good fit for a business that wants to maintain control over their payment processing (unlike an MoR), but offload their sales tax compliance activities to a third party.
Lemonsqueezy: In 2024, Stripe acquired MoR, Lemonsqueezy, to provide an MoR model for businesses looking to outsource all their indirect tax responsibilities. Lemonsqueezy is a great fit for businesses looking to implement an MoR for their financial responsibilities.
Stripe Tax: Stripe Tax is a global tax compliance software solution that is a good fit for Stripe payments customers, keeping all the financial data and tax reporting in one place. Stripe Tax varies from TaxJar in that it manages other tax types outside of the US, for businesses with tax obligations in multiple countries.

Ensure tax compliance for sustainable business growth

Maintaining tax compliance is crucial for a growing business. Non-compliant companies can face penalties, interest, or reputational damage. It’s important not to leave your compliance strategy to chance, regardless of how you choose to manage it.

If you think TaxJar is the right fit for your business, start a 30-day free trial today to see how TaxJar can manage your sales tax burden. Our platform provides real-time calculations, automated filing, and economic nexus tracking to keep your business compliant as you grow. Let TaxJar give you more time to focus on what truly matters—taking your business to the next level.