Merchant of Record services mean that when someone "buys" something from you (e.g. subscription or other product) they're actually legally interacting in all ways that matter with the MoR. Effectively you can think of it as a mostly transparent re-seller. The MoR (e.g. Paddle) is buying the subscription from me and selling it to you. Because I'm never actually interacting with the customers for payments I don't need to deal with regional taxes, refunds, etc – that's all handled by Paddle.

In exchange they take a heftier cut than what you'd get if you used a service like Stripe.