Merchant of Record for WordPress: Who Handles Your VAT and Sales Tax
You sell a service from your own WordPress site. A client in Germany pays an invoice. Somewhere in that transaction, VAT was owed. The question nobody answers when you set up a payment gateway is who was supposed to collect it, file it, and hand it over.
The short version: with an ordinary card processor, that is you. With a merchant of record, it is not. That single difference is why PaySlate Pro supports two merchant of record providers alongside the plain card processors, and it is worth understanding before you pick one.
What a payment processor actually does
Stripe, Square and PayPal move money. They take a card number, charge it, and settle the funds to your account. What they do not do is become the seller. On paper the sale is between you and your client, which means the tax obligations that arise from it are yours: registering where you cross a threshold, charging the right rate, filing the returns, remitting the money.
For a lot of businesses that is completely fine. If you sell to clients in your own country and you already file there, a processor is the cheapest and simplest answer.
It stops being fine when you sell across borders. The EU expects VAT on digital services at the rate where your customer is, not where you are. Several US states expect sales tax once you pass their economic nexus threshold, and each state sets its own. None of this is triggered by you deciding to expand. It is triggered by a stranger buying something.
What a merchant of record changes
A merchant of record buys from you and sells to your client. Legally, it is the seller on that transaction. The tax obligations attach to it rather than to you, so it holds the registrations, applies the right rate at checkout, files the returns, and remits.
Your client sees no difference worth noticing. They pay an invoice on your domain, they get a receipt, the money reaches you. What changes is the paperwork behind the transaction, and who is on the hook for it.
That service is not free. A merchant of record charges more per transaction than a plain processor, because handling tax registration in dozens of jurisdictions is genuinely expensive work. You are buying it deliberately, the same way you buy accounting software instead of a spreadsheet.
The two PaySlate Pro supports
Paddle suits higher volume and more complicated international selling. It has per-product tax categories, so different things you sell can be treated differently, which matters once your catalogue is not just one service.
Lemon Squeezy suits people already running a Lemon Squeezy store for digital products who want invoice payments settling into the same place, with the same tax treatment and the same payouts.
Both connect to your WordPress invoices the same way: pick the gateway in PaySlate settings, add your keys, point a webhook back at your site. Your invoices keep living on your own domain, and the client never lands on a third party’s portal to pay you.
When you do not need one
Do not buy a solution to a problem you do not have. If your clients are domestic, if you are comfortably under the thresholds that would force you to register elsewhere, and if your accountant is already handling your returns, then Stripe or Square will cost you less on every single transaction. Both ship with the free PaySlate plugin.
The moment to reconsider is when you notice you are selling somewhere you have never filed a return, and you do not know whether you were supposed to.
What this does not do
A merchant of record changes who is responsible for the tax on the sale itself. It does not file your income tax, it does not remove obligations you already have where you are established, and it is not a substitute for advice from someone who knows your situation. If you are already registered somewhere, you are still registered.
What it removes is the specific and genuinely nasty problem of accumulating tax obligations in places you have never done business, simply because people there bought from you.
Setting it up
Both providers are part of PaySlate Pro, alongside PayPal and Checkout.com. The full setup for each, including the webhook events and the one step people miss, is on the Paddle and Lemon Squeezy pages. If you are still deciding which gateway fits, the payments overview compares all six.