What is a merchant of record (MoR)?

A merchant of record (MoR) is a legal entity that sells goods or services to an end customer. They take on all payments and associated liabilities, such as collecting sales tax, ensuring Payment Card Industry (PCI) compliance, and handling refunds and chargebacks.

Businesses can become their own MoR to manage payments and liabilities. Alternatively, merchant of record service providers can save companies time and resources by managing payments and sales tax compliance.

How does the merchant of record model work?

When businesses sell through a merchant of record, their customers still access their products through their website. But with the MoR taking on the role of reseller, there are two transactions occurring during the sale: One between the end customer and the MoR, and the other between the MoR and the business.

When the transaction is complete, the merchant of record’s name appears on the customer’s credit card statement as they are making the sale with the customer.

What types of businesses benefit from an MoR?

Any business can benefit from outsourcing creating and maintaining a payments infrastructure and overseeing sales tax compliance. The merchant of record model works well for companies that sell to customers living in other states or countries where the company doesn’t have a legal entity.
MoR frees a business from having to worry the legal and financial aspects of conducting business outside of its locality. Specific industries that benefit from this include:

• SaaS: Anyone can sign up for a software as a service. This can add complications to payments, billing, taxes, and compliance.
• E-commerce & D2C: Many online retailers and direct-to-consumer (D2C) businesses sell internationally without having local offices or bank accounts.
• Digital products/downloads: Businesses that sell downloadable items such as eBooks, games, and so on attract customers from all over the world.
• Mobile apps: The App Store and Google Play store serve as the MoR for apps sold on those platforms.

Why should businesses use a MoR?

MoRs provide businesses with a variety of benefits. Specifically, MoRs allow companies to outsource critical tax, payment, and compliance tasks, such as:

1. Setting up multiple merchant bank accounts in countries where they have customers and accept payments in additional currencies
2. Managing payment card security and complying with data requirements in the locations they sell to
3. Establishing local business entities to manage accounts, taxes, payment, and so on
4. Handling payment currency conversions made in foreign currencies
5. Working with multiple payment processors to facilitate payment routing
6. Negotiating and handling credit and debit card fees
7. Flagging and reviewing fraudulent or suspicious orders
8. Handling payment reconciliation, refunds, and chargebacks
9. Calculating, filing, and remitting sales tax in various locations

Is a merchant of record a reseller?

The MoR can act as a seller or reseller of digital products. Generally, the merchant of record is a middleman between the buyer and the business and handles financial administration, payments, taxes, and fees for the business’s behalf. Then the MoR sends the business the net amount from the transaction.

Examples of companies that are merchant of records

Amazon is one of the most popular MoR. Amazon handles payment processing and regulatory requirements for transactions involving third-party sellers on their platform. The customer sees Amazon on their bank statements and contacts Amazon when they need support.

Other examples include PayPal, Google Play, Etsy, and Airbnb.