If you sell software or digital products globally, you face a choice that pure-physical merchants don’t: a Merchant of Record (MoR) or a plain payment gateway.
The difference in one table
| Gateway (Stripe) | Merchant of Record (Paddle) | |
|---|---|---|
| Headline rate | ~2.9% + $0.30 | ~5% + $0.50 |
| Who collects/remits sales tax & VAT | You | The MoR |
| Who is legal seller | You | The MoR |
| Fraud & chargeback liability | You | The MoR |
| Billing/subscription management | Add-on (Stripe Billing) | Included |
| Payout | You manage | One consolidated payout |
Compare Paddle vs Lemon Squeezy and Stripe vs Paddle.
Why the ~2% premium can be a bargain
Selling digital goods worldwide means you may owe VAT in the EU, GST in several countries, and US sales tax in dozens of states. Doing that yourself means tax-determination software, registration in many jurisdictions, periodic filings, and the staff to manage it. An MoR like Paddle or Lemon Squeezy absorbs all of it. For an indie maker or early SaaS, the ~5% rate is cheaper than the alternative — and far less risky.
When the gateway wins
As you scale, the math flips. The ~2% MoR premium on $1M of revenue is $20,000/year — enough to fund a tax-compliance tool plus part of a finance hire. At that point Stripe (or Braintree) plus dedicated tax software is cheaper and gives you more control over checkout and data.
Rule of thumb
- Pre-revenue to ~$500k/yr, global digital: use an MoR. Speed and zero tax risk beat the fee.
- Scaling SaaS with finance staff: move to a gateway + tax tooling.
- Physical goods: MoRs generally don’t apply; use a gateway/acquirer.
Read interchange-plus vs flat-rate for the equivalent crossover on card processing, and model your numbers in the calculator.