Frequently Asked Questions
Clear answers to the most common questions regarding fee structures, international tax remittance, foreign corporate entity requirements, and payout channels.
Q1.What is a Merchant of Record (MoR) and how does it fundamentally differ from Stripe?
A Merchant of Record (MoR) acts as the legal reseller of your digital software or subscription. In legal terms, the customer buys the product from the MoR (such as Polar.sh, Paddle, or Dodo Payments), and the MoR remits the net earnings to you. This means the MoR is legally responsible for calculating and remitting global sales tax, EU VAT, and GST, managing chargeback disputes, issuing compliant invoices, and adhering to local financial regulations. Conversely, a Payment Service Provider (PSP) like Stripe simply facilitates card processing: you remain the merchant of record, meaning you carry 100% of the legal liability for international tax filings, VAT registration across 50+ jurisdictions, and chargeback penalties.
Q2.Can I accept international payments with a Chinese, Indian, or non-US passport without establishing an offshore entity?
Yes. Modern indie MoRs like Polar.sh, Dodo Payments, Creem, and Whop allow developers to register and pass identity verification (KYC) using their national passport or national ID card without needing a US LLC, UK Ltd, or offshore bank account. The MoR sells to global buyers through its existing corporate entities in the US and Europe, enabling individual makers to launch and monetize globally on day one.
Q3.How do Merchant of Record platforms handle EU VAT and US Sales Tax compliance?
Under international tax law (including EU VAT MOSS / OSS rules and US Wayfair economic nexus precedents), digital software sold to consumers is taxable at the buyer's destination. When using an MoR, the MoR's own tax registration numbers are used on every customer receipt. The MoR automatically calculates real-time tax at checkout, collects it from the consumer, files quarterly returns across the EU, UK, Canada, Australia, and all 45+ US states with sales tax, and remits the revenue to foreign tax authorities on your behalf.
Q4.What are the hidden fees to watch out for when selecting an MoR?
Beyond the headline percentage rate (e.g., 4% to 5%), developers must evaluate: 1) Fixed transaction fees: On micro-ticket items ($5 - $10), a 50¢ fixed fee consumes 5% to 10% of revenue alone. 2) International / non-US credit card surcharges: Platforms like Lemon Squeezy add 1.5% for non-US buyer cards; Stripe adds 1.0%. 3) Currency conversion (FX) margins: Converting USD balances to EUR or local currencies often incurs a 1.5% to 2.5% spread. 4) SWIFT wire payout fees: Withdrawing via traditional international telegraphic transfer costs $15 to $35 per payout, making Wise, local bank clearing, or USDT/USDC payout rails vastly superior for indie developers.
Q5.Can I withdraw my software revenue directly to Wise, Airwallex, or USDT / USDC crypto?
Yes. Platform payout rails vary significantly: Polar.sh and Dodo Payments natively support USDT/USDC crypto payouts, bypassing foreign exchange controls entirely. Polar.sh, Paddle, and Lemon Squeezy natively support multi-currency payout routing to Wise accounts. Airwallex and Mercury offer dedicated virtual accounts that integrate directly with MoR bank transfers.
Q6.What happens when a customer requests a refund or initiates a credit card chargeback?
With an MoR, the platform handles the dispute process directly with Visa, Mastercard, and American Express. When a customer charges back, the MoR's dispute defense team submits transaction evidence. However, dispute fees ($15 - $25) and the refunded transaction fee are deducted from your balance. Most MoRs do not refund original processing fees on chargebacks or refunds.
Q7.Why is Lemon Squeezy harder to get approved for in 2026, and what are the best modern alternatives?
Following its acquisition by Stripe, Lemon Squeezy tightened risk evaluation, lengthened payout delays for non-US entities, and increased manual review scrutiny on new accounts. Modern venture-backed alternatives like Polar.sh (developer-first, open-source friendly, 4% fee), Dodo Payments (low 4% + 40¢ fee, crypto payouts, instant approval), and Creem (optimized for micro-SaaS with low fixed fees) have gained widespread adoption among indie makers.
Q8.At what revenue milestone should an indie developer transition from an MoR to their own US LLC with direct Stripe?
Generally, developers should stay on an MoR until reaching $15,000 to $25,000 in monthly recurring revenue (MRR). Below this threshold, the overhead of maintaining an offshore entity ($500 - $1,500/year for registered agent, Delaware/Wyoming franchise taxes, corporate federal tax returns Form 1120/5472, and tax compliance software like Stripe Tax or Anrok) far exceeds the 1.5% to 2% fee differential between an MoR and direct Stripe processing.