SaaS2 min read
Paddle, Lemon Squeezy or your own Stripe: MoR trade-offs for SaaS
Around 5% of revenue to make sales tax and VAT someone else's problem. For a solo founder selling to consumers in thirty countries that is cheap. For a B2B company with fifty invoiced customers it is not.
Published
A merchant of record buys your software and sells it to the customer. Legally they are the seller, so consumption taxes are theirs to collect and remit. You get a single payment and a much shorter compliance list.
What it actually removes
- US state sales tax in every state that taxes software, including the registrations and the monthly filings.
- EU and UK VAT, which applies to consumer sales from the first euro with no small-seller threshold for a non-established supplier.
- Other consumption-tax regimes for digital services, which now exist in a large number of countries.
- Invoicing requirements that differ by country, and the tax-identifier collection that goes with business sales.
- Chargeback handling, since they are the merchant on the statement.
Set against that: typically around 5% of revenue, versus roughly 2.9% plus a fixed fee for card processing on your own account. The spread is the price of the compliance.
Where the crossover sits
| Your situation | Usually right |
|---|---|
| Consumer product, low price, many countries | Merchant of record. The compliance work is wildly disproportionate to the revenue per customer. |
| Solo founder, no finance function | Merchant of record. Your time is the real alternative cost. |
| B2B, annual invoices, a known set of customers | Your own processor. You have few enough transactions to handle the obligations, and enterprise buyers often want to pay you directly. |
| Enterprise with procurement, security review and custom terms | Your own processor. An intermediary complicates the contracting relationship. |
| Mostly domestic | Your own processor. You are dealing with a handful of state registrations rather than thirty countries. |
What you give up
- Their name on the statement, which produces some 'I do not recognise this' disputes.
- Checkout flexibility. Less control over the highest-leverage page in the funnel.
- Some customer data, depending on the provider.
- Payout timing, which is on their schedule rather than yours.
- Their risk appetite. You are a merchant on their platform, and their policies apply on top of the card networks'.
Switching later
Moving from a merchant of record to your own processor means migrating active subscriptions, which is a real project with real churn attached — customers have to re-authorise. Moving the other way is easier. If you are genuinely unsure and international consumer sales are likely, starting with the merchant of record and moving later is the less painful order.
Whichever rail you pick
Founders 8 holds the entity, the registrations and the deadlines behind it.
Build your workspaceThis is one section of the saas structure guide, which covers the entity choice itself.
Founders 8 does not provide tax advice. Tax residency depends on facts and rules specific to each jurisdiction — review your position with a qualified adviser.