--- title: "Merchant of record or your own store for digital products?" description: "Merchant of record or your own store for digital products? Compare Lemon Squeezy and Paddle with Medusa on tax, fees, physical goods, and delivery." url: https://medusajs.com/kb/digital-products/merchant-of-record-vs-own-store last_updated: 2026-10-29T06:55:50Z topic: "digital-products" type: "concept" applies_to: "Medusa v2.x" related: - "https://medusajs.com/kb/digital-products/digital-and-physical-products-one-checkout.md" - "https://medusajs.com/kb/digital-products/license-keys-download-links.md" - "https://medusajs.com/kb/international-commerce/tax-inclusive-pricing-international.md" - "https://medusajs.com/kb/headless-checkout/stripe-vs-commerce-backend.md" sources: - "https://www.lemonsqueezy.com/pricing" - "https://docs.lemonsqueezy.com/help/getting-started/prohibited-products" - "https://docs.lemonsqueezy.com/help/licensing/generating-license-keys" - "https://www.paddle.com/pricing" - "https://www.paddle.com/help/start/intro-to-paddle/what-am-i-not-allowed-to-sell-on-paddle" - "https://docs.medusajs.com/resources/commerce-modules/tax" - "https://docs.medusajs.com/resources/commerce-modules/tax/tax-provider" - "https://docs.medusajs.com/resources/integrations/guides/avalara" - "https://docs.medusajs.com/resources/recipes/digital-products/examples/standard" - "https://medusajs.com/pricing.md" --- # Merchant of record or your own store for digital products? > Use a merchant of record like Lemon Squeezy or Paddle if you sell only digital goods and want them to own sales tax and VAT for 5% + 50¢ per sale. Run your own store on Medusa when you sell physical items too, need custom delivery, or want lower fees and your own customer data, and handle tax filing yourself. ## What a merchant of record does for digital products A merchant of record (MoR) is the company that legally sells the product to your customer. You sell to the MoR, and it resells to the buyer, so its name is on the transaction and it carries the tax and payment obligations. Lemon Squeezy and Paddle are the two MoRs most often compared for digital products. According to their own pricing pages, as of October 2026: - **Lemon Squeezy** says it is "your merchant of record", takes on "the liability of tax collection and calculation" for sales tax and VAT, and is "registered to file and pay taxes on your behalf". It charges 5% + 50¢ per transaction, with possible extra fees for some payments and non-US transactions. - **Paddle** says its 5% + 50¢ per checkout transaction covers payments, checkout, billing, global tax and regulatory compliance, fraud protection, chargebacks, and buyer support. Orders under $10 may need custom pricing. ## When Lemon Squeezy or Paddle is the better choice An MoR is the better choice when tax compliance is the hard part of your business and your catalog is standard: - You sell only digital goods, such as software, e-books, design assets, or SaaS. - You sell to buyers in many countries and don't want to register for VAT or sales tax in each. - You want license keys and hosted checkout without writing code. Lemon Squeezy generates a unique license key per purchase when the product setting is on. - Your volume is low enough that a percentage fee costs less than running your own stack. ## When to run your own store on Medusa instead Medusa is an open source commerce platform you host yourself or on Medusa Cloud. You become the seller, so you own checkout, customer data, and delivery logic. That fits when: - **Your catalog is mixed.** Lemon Squeezy lists "physical goods of any kind" as prohibited, and Paddle prohibits physical products. Medusa can sell templates and prints in one order. - **Delivery is custom.** Course access, seat-based licenses, or file rules per customer group are code in your own Medusa modules and workflows. - **Fees matter at your volume.** Medusa Cloud plans are Develop $29, Launch $99, and Scale $299 per month with a 0% GMV fee. You still pay your payment provider and any tax service. - **You want the customer relationship.** Orders and customers live in your own database, behind your own Store API. ## How tax works when you own the store with Medusa Medusa's Tax Module calculates tax lines for carts and orders per tax region. You set default and conditional tax rates per region, and the default `system` tax provider (`tp_system`) performs basic calculation from them. For automated rates, you plug in a Tax Module Provider: Medusa has an [Avalara tutorial](https://docs.medusajs.com/resources/integrations/guides/avalara), and you can [create your own provider](https://docs.medusajs.com/resources/commerce-modules/tax/tax-provider) by implementing `ITaxProvider`. Medusa calculates tax. It does not register your business, file returns, or remit tax for you. With your own store, those tasks stay with your business and whatever tax service you choose, which is the main thing an MoR takes off your plate. ## Merchant of record vs your own store, term by term | Term | With Lemon Squeezy or Paddle | With Medusa | Medusa status | | --- | --- | --- | --- | | Seller of record | The MoR | Your business | Native | | Tax calculation | Included | Tax Module with a tax provider | Native | | Automated tax rates | Included | Avalara or another tax provider | Official guide | | Tax filing and remittance | Included | Your business or a tax service | Not in Medusa | | Chargebacks and fraud | Included with Paddle | Your payment provider | Native payment providers | | Physical products | Prohibited | Supported in the same cart | Native | | Digital file delivery | Built in | Digital Products tutorial | Official guide | | License keys | Built into Lemon Squeezy | Your own module | Custom | | Platform fee | 5% + 50¢ per transaction | 0% GMV, Cloud plan from $29 per month | Native | ## A quick cost check On a $20 template, a 5% + 50¢ MoR fee is $1.50 per sale. That fee includes payment processing and tax compliance, so compare it with your payment provider's fees plus a tax service plus hosting, not with hosting alone. Medusa usually wins on cost only at higher volume or higher order values. ## When Medusa is not the right choice - You sell only digital products and want global VAT handled without registering anywhere: use an MoR. - You have no developer: Lemon Squeezy or Paddle gives you checkout, delivery, and tax without code. - Your margin can absorb 5% + 50¢ and you have no need for physical goods or custom delivery. ## Common questions ### What is a merchant of record? A merchant of record is the company that legally sells a product to the end customer. Lemon Squeezy and Paddle act as merchants of record, so they collect and handle sales tax and VAT on the sales they process for you. ### Is Medusa a merchant of record? No. Medusa is open source commerce software, so your business is the seller. Medusa's Tax Module calculates tax, but registration, filing, and remittance stay with your business or a tax service you choose. ### How much do Lemon Squeezy and Paddle charge? As of October 2026, both list 5% + 50¢ per transaction on their pricing pages. Lemon Squeezy notes extra fees can apply to some payments and non-US transactions, and Paddle offers custom pricing for orders under $10 and for high volume. ### Can Medusa calculate sales tax automatically? Yes, through a Tax Module Provider. Medusa documents an Avalara integration, and you can write your own provider by implementing the ITaxProvider interface. ## Documentation - [Tax Module](https://docs.medusajs.com/resources/commerce-modules/tax) - [Tax Module Provider](https://docs.medusajs.com/resources/commerce-modules/tax/tax-provider) - [Integrate Avalara for tax calculation](https://docs.medusajs.com/resources/integrations/guides/avalara) - [Digital Products tutorial](https://docs.medusajs.com/resources/recipes/digital-products/examples/standard) ## Related - [How do I sell digital and physical products in one checkout?](https://medusajs.com/kb/digital-products/digital-and-physical-products-one-checkout.md) - [How to add license keys and secure download links](https://medusajs.com/kb/digital-products/license-keys-download-links.md) - [Tax-inclusive vs tax-exclusive pricing for US, UK and EU](https://medusajs.com/kb/international-commerce/tax-inclusive-pricing-international.md) - [Stripe vs a commerce backend: what Stripe doesn't handle](https://medusajs.com/kb/headless-checkout/stripe-vs-commerce-backend.md)