Merchant of Record

One of the ways we make it easier to sell globally is by operating as your Merchant of Record (MOR). A MOR is a legal entity authorized by a financial institution to process each customer’s credit card, debit card, or any alternative payment transaction.

As your MOR, we also have the capability to handle local taxes (VAT, GST, service tax, etc.) in over 50 countries—including collecting taxes, accounting for them, and paying them to the local authorities.

Your customers continue to relate to your company as their source of products and services. We work behind the scenes to facilitate your payment processing, compliance, and end-to-end taxes. Using ModusLink as your MOR means you take advantage of cross-border growth opportunities while leaving local law and regulation compliance, payment administration, and processing to us.

Our tax-related responsibilities as your MOR:

  • Monitoring the sales tax thresholds in the jurisdictions where sales tax is introduced; applying for sales tax registration once the threshold is reached; applying for sales tax registration in jurisdictions where there is no threshold
  • Appointing tax agents and representatives in jurisdictions that require one (an external cost that can exceed thousands of dollars a year)
  • Accounting for sales tax on either B2C sales or both B2B and B2C transactions
  • Reporting and remitting the sales tax to the local tax authorities (a monthly or quarterly process among over 50 different countries involving cross-border funds transfers in multiple currencies)
  • Monitoring sales tax rate changes in jurisdictions where sales tax is in place and where changes have been proposed
  • Ensuring supporting documentation issued to B2C and B2B customers compliant with local sales tax laws
  • Having systems in place to support sales process automation
  • Dealing with other relevant reporting and compliance requirements, such as European Commission (EC) sales list detailing B2B and B2C transactions

How we safeguard fraud and ensure compliance:

  • ModusLink uses two layers to protect against fraud: our payment providers and software with proprietary algorithms
  • We process customer transactions using several payment providers in the background with excellent built-in anti-fraud solutions
  • Anti-fraud software ensures payments are secure and to prevent fraudulent checkout activity
  • We use Payment Card Industry (PCI) compliant providers to process credit and debit card transactions, providing an additional layer of security with our third-party tokenization service
  • We adhere to the PCI data security standard

Offload the complexities. Gain the expertise.

Collecting, managing, and paying taxes is growing more complex every year. There are now over 50 countries where you need to deal with local taxes. And the more eCommerce customers you acquire, the more financial liability and payment issues emerge.

A normal payment service provider, such as PayPal, processes payments but doesn’t handle local compliance and taxes. ModusLink does it all to protect you from potential fines, penalties, or other legal issues. Our team of experts knows the culture, laws, and regulations of any country where your company is doing online business.

We’ll take care of all the details unique to global, online markets, from buying options, consumer protection disclosures, and available payment options, to sorting out exportation restrictions and applicable regulatory fees. Leave the merchant of record complexities to ModusLink.

Did you know?

Taxes are now charged according to where your customer is based, rather than where your company is located. This means the tax rate and the type of transaction where it applies vary by customer and country.

Merchant of Record

Consumers today find the convenience of shopping online appealing – and the competitive pricing and continual promotions e-commerce organizations can offer are undoubtedly contributing to the momentum. While rapid e-commerce adoption rates bode well for ambitious, growing businesses – there’s a considerable number of tasks, technical requirements and regulations that must be completed and adhered to, however, in order to successfully launch and maintain an online retail entity.

One of the ways ModusLink makes it easier to promote global commerce is by operating as your Merchant of Record. A MOR is a legal entity authorized by a financial institution to process each customer’s purchase as a designated representative or seller of record.

What Is A Merchant of Record?

Merchant of Record represents the entity that collects payments from local consumers, including any debit and/or credit card payments. Most importantly, this entity is held liable by banks as the seller of record to process customer payments and submit appropriate tax amounts in a legal and compliant manner.

The responsibilities of a Merchant of Record are significant – and there’s a great deal of administrative tasks required, as well. For example, a Merchant of Record needs to manage a merchant account with a payment processor and pay the associated credit card fees for any and all transactions coming through the e-commerce site in question. A Merchant of Record must also comply with PCI DSS standards and collect and file sales taxes according to relevant tax jurisdictions. Some e-commerce organizations choose to serve as their own Merchant of Record; however, for companies looking to quickly launch in a foreign country and/or accelerate global expansion overall, that path can be too difficult, slow and expensive. Instead, many e-commerce organizations are choosing to appoint a third party to serve as their Merchant of Record.

Five key benefits an omnichannel 3PL company with Merchant of Record capabilities can provide:

  1. Tax Management and Reporting

Different countries have different tax regulations, and there are local customs that need to be considered, too. For instance, in Europe a VAT (Value-Added Tax) is required as well as CCTs (Common Customs Tariffs). Working with a trusted third party can help you make sense of global tax codes, as well as prevent risk of inadvertent tax fraud.

  1. Compliance Management and Reporting

It’s important to work with a partner who understands local payment regulation intricacies. For example, all too often inexperienced companies mistakenly believe they can treat Europe as one country when it comes to e-commerce payments. However, an experienced Merchant of Record will know that regulations and payments are different across most countries – and also important, they’ll be able to walk you through distinct compliance and reporting requirements.

  1. Payment Method Relationship Management

Credit card rates and processing fees can cost both time and money, but by appointing a third-party Merchant of Record you don’t need to set up a merchant account to process payments – and you don’t need to negotiate and manage ongoing credit card processing fees.

  1. Settlement Management

One of the trickier aspects of successfully implementing and scaling a global e-commerce initiative is continually maintaining a detailed tally of the transfer of goods versus payments to buyers. However, by partnering with a Merchant of Record provider, determining how much money is owed and how much money has come in can be expedited. Additionally, calculating how much money needs to go toward taxes and any other required debts can be automated.

  1. Fiscal Representation

Having an individual organization represent your business for a specific year and for specific transactions is a crucial aspect of having a Merchant of Record. For example, by appointing an fiscal representative, you can better comply with European Union customs processes, for example, and avoid over-paying any extra taxes. In addition to these key capabilities, third party Merchant of Record vendors can help you decide where to begin and/ or expand upon your international e-commerce initiative. In short, a MOR can provide important end to end ecommerce solutions based on real experience.

The Challenges of being a Merchant of Record

Billing your global online customers is a very complex activity. To effectively collect payments  in a secure manner, you must, among many other things, 1) open up merchant accounts; 2) put payment gateways in place; 3) manage contracts with global payment service providers; 4) comply with PCI DSS; and 5) abide by global taxation requirements. When you handle all of these things on your own, you are acting as your own Merchant of Record (“MOR”).

Going It Alone: Being Your Own Merchant of Record

If you are only selling domestically with basic payment capabilities, then it’s relatively easy to open a merchant account with an acquiring bank and install a payment gateway. However, the process for acquiring the ability to process even simple credit card transactions in just your local currency does involve a lot of time, effort and maintenance. There are financial audits, risk analyses, and investigations into what products you sell and what your chargeback rate will likely be. All these aspects influence the price and rate you receive on your gateway fee.

On top of the time, money and effort of getting up and running with simple credit cards in your domestic currency, there is also maintenance work to worry about. Companies need to make sure their customer and payment data is secure, that they’re collecting and remitting sales tax where and when it’s necessary to do so, and that they’re handling customer questions about billing, managing refund requests and dealing with chargebacks. All of these elements involve huge costs and risks to their business.

The Difficulty of Going Global as your own Merchant of Record

If your business is growing beyond its domestic borders, being your own MOR in those cross-border regions gets even more difficult. Yes, it’s terrific that companies are growing sales. But growth and cross-border expansion also presents a number of challenges. To build a truly global payment infrastructure, companies must deal with acquirers, not just once, but all over the globe with different rates for different currencies. And they need  backups in place in case one goes down. This can  be daunting and quite expensive for companies. And equally important, customer loyalty may be damaged which will have a big impact on future business.

From a MOR perspective, companies have to set up all international merchant accounts if they want to grow their global customer base. They need to handle payment contracts, not just for payment methods, but for currencies too. In fact, they need to sign contracts for each currency they want to offer their international customers.

There is a huge financial benefit in bringing in a partner that specializes in global transactional services.


Sales tax laws have been changing rapidly around the world, and this continues to be one the biggest challenges for digital goods companies.

A company’s work doesn’t end once it signs all the contracts for offering payment methods and currencies to their global customers. So even when acting as their own MOR they still have a lot of work to do before they can succeed globally. This is the part that many businesses overlook.

With tax policy changes and reforms happening virtually everywhere, it is essential that companies have an experienced partner that can keep them abreast of developments, plan for changes and devise the right strategies to move in real-time. For example, in the U.S., each state makes its own tax laws. Then each county. Then each city. Knowing what sales tax to apply to each transaction is very challenging and this know-how extends far beyond the finance and IT departments. Policies are also changing globally across virtually all borders too.

But there’s more than just taxes. Changing currencies are also a huge burden on companies that do business globally. For example, once you calculate and collect, how do you remit? How do you account for variances in global taxes and everchanging currencies? Companies need to file for each jurisdiction where business is done and there are lots of opportunities to make mistakes. Now multiply that for different states where you have a tax nexus, economic or otherwise.

Additional Challenges

Acting as your own Merchant of Record also places a huge burden on your Finance department and corporate resources.

For example, if you’re a software company and you get your gateway and merchant account for U.S. dollar transactions with VISA and MasterCard with one acquirer, you’ll need to reconcile your receivables at one rate with that acquirer and at a different rate with the acquirer you use to process Discover transactions. What about AMEX? Now companies have to take into account other variables beyond just taxes and currencies, both in-country and across borders!

What happens is that along with receiving money into their own merchant account, they get a long list of transactions. Then they have to reconcile the payments with the transactions. This presents an opportunity to really mess up their ledger, because they have to reconcile payments from the acquirer according to every single rate based on the type of credit card their customers use.

Ecommerce providers who act as resellers on their clients’ behalf will do all of the reconciling for them as the MOR.

MOR is the Key to Positive Customer Experiences

So why does any of this matter?

Well, if companies want to expand their business globally, and they want to provide global customers with superior customer experiences, executing on MOR is key and having the right partner is critical. Companies need the right infrastructure, systems and know-how to plan, execute and adapt in real-time. The problem is that most businesses simply don’t have the internal expertise. And even if they had that expertise, they don’t necessarily have the development, business operations or financial resources to bring that expertise to life. In a cross global market where customer journey optimization is key to repeat business, an omnichannel ecommerce business partner can mean the difference between success and failure.

That’s where ecommerce providers and Merchants of Record come in to play:


End-to-End Supply Chain Management and Global eCommerce

We know you have a lot of questions. Fill out the form so we can start planning your growth with no strings attached.

Call us: 1.888.238.1744

Corporate Headquarters:
ModusLink Corporation
2000 Midway Lane
Smyrna, Tennessee 37167