No law requires a merchant of record. But if you sell software to consumers in the EU, the UK or another country that taxes digital services, someone has to register there and pay that tax. If your business isn't established in the EU, EU VAT is due from your first consumer sale there, and the UK applies the same rule to businesses established outside the UK. A merchant of record (MoR) is the legal seller on every sale, so it registers, collects and files for you, for a fee. Without one, you do it yourself.
The short answer
Count the tax registrations your customer mix triggers. Then decide whether you will file those returns yourself or pay someone to be the seller instead.
The count depends on where you are based, and most answers skip that part. A US founder owes EU VAT from the first sale to a consumer in Paris. A founder in Lisbon needs no extra registration until cross-border consumer sales pass €10,000 a year. The questions below get you your number.
A count of zero means a payment processor is enough for now. Any count above zero is a filing job, and the only choice left is who does it.
Count your registrations
Each row below is a registration you would hold and file yourself without an MoR. Consumers are usually the trigger. In the EU and UK, a business buyer in another country with a valid VAT ID accounts for the VAT itself (reverse charge), so B2B sales there rarely add a row. US sales tax has no reverse charge, so business buyers count the same as consumers.
Your consumers are in | Registration starts | Registrations you'd hold |
|---|---|---|
EU (27 countries) | Business outside the EU: first sale. Business in one EU country: once cross-border consumer sales pass €10,000 a year | 1: non-Union OSS in any EU country you choose if you're outside the EU; Union OSS at home if you're inside |
UK | Business outside the UK: first sale. UK business: above £90,000 taxable turnover in 12 months | 1, with HMRC |
US | Only in states that tax SaaS, once you pass that state's threshold: usually $100,000 in sales; $500,000 in California and Texas; $500,000 plus more than 100 sales in New York. Some, including Hawaii, Rhode Island and West Virginia, also count 200 transactions. Your home state counts from the first sale if it taxes SaaS | 1 per state |
Canada | Above CAD 30,000 in 12 months | 1 federal GST/HST, plus provincial ones: Saskatchewan from the first sale, British Columbia from CAD 10,000, Québec from CAD 30,000, Manitoba generally from CAD 30,000 |
Australia | AUD 75,000 or more a year | 1 |
Switzerland | Worldwide turnover of CHF 100,000 or more and any Swiss consumer sale | 1 |
Japan | Above ¥10 million in taxable sales in the base period, two years earlier. A company with ¥10 million or more in capital can owe sooner | 1 |
The US count keeps growing. Anrok counted 25 jurisdictions taxing SaaS in some form in 2025. California and Colorado start taxing most SaaS statewide on 1 January 2027, under California SB 122 and Colorado HB 26-1223.
Here is the count for one founder. She runs an $80,000-a-year SaaS from Texas. 30% of revenue comes from EU consumers, 10% from UK consumers, 50% from US customers across many states, and 10% from Canada. Her count is 3, or 4 with a single consumer in Saskatchewan:
EU: 1 non-Union OSS registration, from the first EU consumer sale.
UK: 1 HMRC registration, from the first UK consumer sale.
Texas: 1, because Texas taxes SaaS and it's her home state. No other state reaches its threshold with $40,000 spread across the country, unless a low price takes her past 200 sales in a state with a transaction test.
Canada: 0 federally, because $8,000 is well under CAD 30,000. We're assuming no province reaches its own threshold. Saskatchewan has no threshold, so one consumer there adds a registration.
That's 8 quarterly returns a year for the EU and UK alone, plus the Texas filings, plus tracking rate changes and keeping evidence of where each buyer lives.
Then put a price on it. Take the MoR's premium over your processor and tax tool, in percentage points, and multiply it by your revenue. At a 2-point premium, $80,000 a year costs $1,600, about $133 a month. If tools, accountant fees and your own hours for 3 registrations cost less than that, file yourself. If they cost more, the MoR is cheaper.
The answer by home country
US founders
EU and UK VAT start with your first consumer sale in each, because you're established in neither. One European consumer is enough to need a non-Union OSS registration, and one UK consumer is enough to need an HMRC registration.
US sales tax starts later. Your home state counts from the first sale if it taxes SaaS, as New York and Texas do. Other states count only if they tax SaaS and you pass their threshold. A founder in California or Colorado gets a home-state registration on 1 January 2027, when both states start taxing most SaaS.
Selling only to US businesses doesn't remove sales tax: many states that tax SaaS tax business buyers too, and there's no reverse charge to shift it. We sell to US consumers but not yet to US businesses, so on tiun your US business revenue stays on your own billing.
EU founders
Most EU founders already file VAT at home, unless a small-business exemption covers them. The €10,000 threshold covers your cross-border consumer sales across the whole EU, and it applies only if you're established in one EU country. Below it, you can charge your home VAT on those sales. Above it, you charge each buyer's local rate and file one Union OSS return at home each quarter.
Sales to businesses in other EU countries use the reverse charge: check the buyer's VAT ID in VIES and print it on the invoice with a reverse-charge note. UK consumers count from the first sale, because you're established outside the UK.
UK founders
UK VAT at home starts above £90,000 of taxable turnover in any 12 months. For the EU, you're a non-EU seller: EU VAT is due from the first EU consumer sale. You register for non-Union OSS in any one EU country and file one quarterly return for all 27. US sales tax works as it does for everyone else.
Signs an MoR is the wrong fit
Most of your revenue is large B2B contracts, invoiced on net-30 or net-60 terms and paid by bank transfer. An MoR has to run each sale through its own checkout to invoice it, and we don't support bank-transfer invoicing for enterprise contracts yet.
Most of your buyers are US businesses. We don't sell to US businesses yet.
You sell physical goods, run a marketplace for other sellers, or sell in person. MoRs for software, us included, are built for digital products.
Your volume is high and your margin thin, so the premium from the calculation above costs more than filing yourself.
Many of your buyers live in countries your MoR doesn't sell to. Check the buyer-country list before you sign. Ours covers 64 countries.
Starting with Stripe and switching later
You can start on a payment processor and move to an MoR later, or move the other way. Two things make a switch expensive: tax registrations and saved cards.
Moving to an MoR, your own registrations stop growing once the MoR is the seller of new sales. File the last returns that cover your own sales, then close the registrations you no longer need: OSS, HMRC, US state permits. Your subscribers' saved cards still sit with your processor, so ask the MoR how they move across.
Moving away from an MoR, your subscribers' saved cards sit with the MoR's payment processor, not with you. Unless the MoR transfers those card tokens to your new processor, every subscriber has to enter their card again. Ask any MoR about token export before you sign.
On tiun there's no fixed term, and you can end the agreement at any time with immediate effect. Checkout stops for new buyers. Existing subscriptions keep running through us until the buyer cancels, the subscription ends, we end it, or you tell us to cancel them. You can export customer records as CSV or through the API, and the export stays open for at least 90 days after you leave. Our agreement doesn't cover moving card tokens to another processor, so if that matters to you, raise it with us before you sign. The full terms are on legal.tiun.io.
Merchant of record providers compared
Base card prices as published in early November 2026. Several providers add fees for international cards, currency conversion or subscriptions, so compare the all-in rate on your own customer mix.
Stripe's 3.5% and the percentage fees at Paddle, Lemon Squeezy, Polar, Dodo Payments and Creem are calculated on the total the buyer pays, including VAT or sales tax. On a $100 sale with 20% VAT, the fee applies to $120.
Provider | Base price | Worth knowing | Comparison |
|---|---|---|---|
tiun | 2.9% + $0.30; +0.5% on subscription payments; 1.5% payout fee | International cards and tax included. No separate currency conversion fee, though our conversion rate may include a margin. Login and customer database included. Swiss company. Sellers in 39 countries, buyers in 64 | tiun pricing |
Paddle | 5% + 50¢ | Long-running MoR for software, based in the UK. International cards and subscriptions included. Up to 1.5% conversion margin if you take payouts in a currency other than your balance currency | tiun vs Paddle |
Stripe Managed Payments | 3.5% on top of standard Stripe processing (2.9% + 30¢ on US cards); +1.5% international cards; +1% currency conversion; +0.7% Stripe Billing on subscriptions | Stripe's own MoR, generally available since April 2026. Digital products only. Doesn't work with Connect, and Stripe Tax is the only compatible tax tool. With Adaptive Pricing on, Stripe drops its conversion fee and the buyer pays one instead | tiun vs Stripe |
Lemon Squeezy | 5% + 50¢; +1.5% international; +1.5% PayPal; +0.5% subscriptions | Owned by Stripe since July 2024. Its stated goal is an easy way to migrate users to Managed Payments; no date set | tiun vs Lemon Squeezy |
Polar | 5% + 50¢ on the free Starter plan; +1.5% non-US cards; paid plans from $20 a month lower the rate | Open-source billing; current plans since 27 May 2026 | tiun vs Polar |
Dodo Payments | 4% + 40¢ on US cards and wallets; +1.5% international; +0.5% subscriptions; +3% PayPal and buy now, pay later | Lists separate rates for domestic Indian payments in rupees | tiun vs Dodo Payments |
Creem | 3.9% + 40¢ | No international card fee. Payout fees can apply outside the EU and SEPA countries | Creem pricing |
We built tiun for founders who also need login and customer data: auth, payments and the customer database come in one integration, which you can set up through an AI coding agent.
FAQ
Is a merchant of record legally required?
No. The law requires someone to register for and pay VAT, GST or sales tax where your buyers are. An MoR takes that on by becoming the seller; you can also do it yourself.
Do I need to register for VAT for one EU customer?
If the customer is a consumer and your business is outside the EU, yes: EU VAT is due from that first sale, through one non-Union OSS registration. If the customer is a business with a valid VAT ID, the reverse charge applies and you don't register. If your business is in one EU country, cross-border consumer sales under €10,000 a year can carry your home VAT instead.
I only sell to businesses; do I need an MoR?
For EU and UK sales, often not, because business buyers with a VAT ID handle the VAT through the reverse charge. The US is different. States that tax SaaS count business sales toward their thresholds, so a B2B product can still trigger state registrations. If your deals are large and paid by bank transfer, a processor with invoicing usually fits better than an MoR.
Can I start with Stripe and switch later?
Yes. Expect to close the tax registrations you no longer need, and plan for saved cards: unless card tokens are transferred, subscribers re-enter their card details. Ask any MoR about token export before you sign.
Does an MoR handle my income tax?
No. An MoR handles the VAT, GST and sales tax on the sales it makes. Income and corporate tax on your profit stay with you. With us, each monthly payout comes with a credit note listing transactions, fees and deductions, which your accountant can book.