Merchant-of-Record Boundary

The Merchant-of-Record boundary is the line where tax liability, chargeback exposure, and payment failure handling stop being the agency's problem and start being the vendor's. On one side sit platforms like Paddle, which acts as the legal seller across 300+ markets and absorbs VAT, sales tax, and fraud disputes. On the other side sit gateway-based stacks like Chargebee or MemberPress, where the agency's client remains the merchant and owns every compliance obligation. The framework matters because agencies routinely quote a billing build without pricing the compliance work it creates. A client selling digital memberships into the EU can face registration thresholds in each member state; moving that client onto an MoR model removes the filings but adds roughly 5% of transaction value in fees. The trade is not cost versus no cost. It is predictable margin compression versus unbounded administrative exposure, and the right answer changes as the client's revenue mix shifts.