What is a merchant of record, and should an Indian business use one?

An Indian developer selling a WordPress plugin to buyers in dozens of countries faces a problem a consultant with three clients does not: the buyers' countries may expect sales tax or VAT to be collected on digital sales. A merchant of record takes that problem over by becoming the seller.¹ The trade-off is a higher fee, less control over the customer relationship, and payouts on the MoR's schedule.²³⁴

This page explains the model and lists what three merchants of record publish. It does not recommend one.

What is a merchant of record?

A merchant of record is the company that legally sells to the end customer, collects payment, and is responsible for the sale's tax and disputes.¹³

• Dodo Payments: its Master Service Agreement describes Dodo reselling a business's digital product to buyers as the legal seller, handling customer-side sales tax and chargebacks, and paying the business a supplier fee.¹
• Paddle: says it handles payments, checkout, billing, global tax compliance, fraud protection, chargebacks and buyer support as merchant of record.³
• Lemon Squeezy: says it is "your merchant of record".⁴

In each case the MoR, and not your business, is the seller the buyer deals with.

Who does a merchant of record apply to?

A merchant of record applies to businesses that sell software, SaaS or digital products to many buyers across countries and would otherwise face sales tax or VAT registrations abroad.¹³¹⁴

A consultant, agency or freelance designer billing named clients usually invoices directly instead; see choosing a payment gateway or choosing a payment platform.

How does a merchant of record work?

A merchant of record works by buying your product's sales from you: the customer buys from the MoR, and the MoR pays you for supplying the product to it.¹

1. The end customer buys the digital product from the MoR, which is the legal seller.¹
2. The MoR collects payment and handles the customer-side sales tax or VAT and chargebacks.¹³
3. The MoR pays you a supplier fee on its payout schedule. Dodo pays from USD, GBP or EUR wallets, bi-monthly by default.²
4. The payout arrives in India, and the FIRA, purpose code and Export Declaration Form (EDF) follow that payout, not each sale. From 1 October 2026 every service exporter files an EDF.⁷

This differs from a payment gateway. With a gateway such as Razorpay or Stripe, you are the seller, your customer pays you, and the gateway processes the payment; an RBI-authorised cross-border aggregator (PA-CB) then settles the export receipt to you in India, within ₹25 lakh per transaction.⁵

What fees, payouts and documents apply to a merchant of record?

Merchants of record charge a percentage plus a fixed amount per transaction, pay out on a cycle, and say little on their pricing pages about Indian documents.³⁴⁸ The table lists the three alphabetically, as none is in this site's cost ranking.

Note: Dodo Payments says it cannot file the EDF for the business.⁹

What does a merchant of record not cover for an Indian business?

A merchant of record does not cover services sold to a single client, physical goods, or the Indian side of compliance.¹¹ Your Indian income tax, GST registration and FEMA reporting stay with you.⁷

• GST recipient: your customer for GST purposes is the MoR entity, not the end buyer. Export treatment under GST needs, among other conditions, a recipient located outside India, so check which entity you contract with.⁶ Dodo's agreement is with Dodo Payments Inc. and its group companies, which include an Indian private limited company.¹ Confirm with a chartered accountant how your supply is treated. See GST on export of services.
• Invoicing: you cannot invoice the buyer yourself. Dodo says the business may not invoice buyers itself.¹
• EDF: the export receipt comes from the MoR, so the EDF follows that payment. Dodo says it cannot file the EDF for the business.⁷⁹

Getting the GST recipient wrong is the costliest of these, because it decides whether your supply qualifies as an export.⁶

Which platforms handle international product sales, and how does the cost compare?

A merchant of record usually costs more per sale than a gateway, because the fee covers tax handling and disputes. Paddle and Lemon Squeezy publish 5% + 50¢, and Dodo Payments 4% + 40c on US cards.³⁴⁸

Rows follow this site's cost ranking: Razorpay has an estimated cost, and the others do not publish enough to estimate, so they follow A to Z. The gateway figures exclude what you would spend registering for and filing sales tax or VAT abroad yourself, which is the cost an MoR replaces. Put both totals side by side for a typical month of sales before deciding.

What are the common mistakes with a merchant of record?

The common mistakes with a merchant of record are treating it like a gateway, assuming it handles Indian compliance, and expecting rupee payouts.¹²⁹

• Invoicing the buyer: the MoR is the seller, and Dodo says the business may not invoice buyers itself.¹
• Assuming INR payouts: Dodo says INR payouts have been discontinued.²
• Leaving the EDF to the MoR: Dodo says it cannot file the EDF for the business.⁹
• Using an MoR for services: an MoR suits product sales; a gateway or collection account tends to suit businesses that want to keep the customer contract, invoice in their own name, receive INR per payment, or sell services rather than products.¹¹¹

Sellers comfortable being paid on a cycle, in foreign currency, rather than per sale, tend to fit the model.²⁴ Compare both routes with your accountant before switching.