Merchant of record vs payment processor
Stripe is a payment processor. You remain the merchant of record (MoR), meaning you are responsible for collecting and remitting sales tax in every jurisdiction you sell into.
Paddle is the merchant of record. They collect and remit US sales tax, EU VAT, UK VAT, Australia GST, and 30+ other regional taxes on your behalf. You receive net revenue after their fee and the taxes they remit.
Side-by-side
| Dimension | Stripe | Paddle |
|---|---|---|
| Role | Payment processor | Merchant of record |
| Per-charge fee | 2.9% + $0.30 | 5% + $0.50 |
| Tax compliance | You handle (or Stripe Tax add-on) | Paddle handles globally |
| Approval | Instant for clean LLC + EIN | 1-3 business days, product fit reviewed |
| Payout schedule | 2 business days | Twice monthly (1st and 15th) |
| Subscription billing | Native, robust | Native, robust |
| Best fit | US-heavy revenue, low EU exposure | Global SaaS, info products, heavy EU revenue |
When Stripe wins
- Your customers are primarily US or in low-VAT-complexity regions
- You want the lowest per-transaction fees
- You handle tax compliance via Stripe Tax (0.5-1% add-on) or a service like Quaderno
- You want maximum payout speed
When Paddle wins
- You sell SaaS or digital products globally with significant EU revenue
- You want zero tax compliance work and accept the 5% fee premium
- Your team is small and tax compliance overhead is a real time sink
- You sell to consumers in jurisdictions where VAT registration is otherwise required
Fee math at $10K monthly revenue
| Scenario | Stripe direct | Stripe + Stripe Tax | Paddle |
|---|---|---|---|
| Processor fee on $10K | $290 | $290 + ~$80 tax fee | $550 |
| EU VAT you owe (assume 50% EU revenue) | ~$2,000 | ~$2,000 | Paddle handles |
| Your time on tax filings | ~10 hours/quarter | ~2 hours/quarter | 0 hours |
| Effective fee plus tax overhead | $290 plus VAT plus time | $370 plus VAT plus 2hr | $550 (Paddle remits VAT) |
Stripe Tax as the middle ground
Stripe Tax is a Stripe add-on that calculates and reports sales tax / VAT for transactions you process through Stripe. The fee is approximately 0.5% on top of Stripe's standard 2.9% + $0.30.
You remain merchant of record but the calculation and reporting work is automated. For founders who want most of Paddle's tax convenience without the 5% fee, Stripe + Stripe Tax is the practical middle ground. You still register for VAT in jurisdictions where required and file returns yourself, but the data is ready.