Stripe advertises 1.5% in Europe. Paddle and Lemon Squeezy advertise 5% plus $0.50. At first glance there is nothing to compare. But they are not selling the same thing, and on some sales the price difference is close to zero.
What a merchant of record is
When you take payments through a processor like Stripe, you are the seller. Your name appears on the customer's statement, you issue the invoice, and you are responsible for charging and filing tax on every sale, in every country where you have that obligation.
A merchant of record such as Paddle or Lemon Squeezy steps in between: legally, it is the seller. Your customer buys from it, it charges whatever VAT or sales tax applies, files it, and pays you what is left. It also handles invoices and disputes. That is the part the 5% pays for.
The tax work it takes off you
If you sell digital products to consumers in several countries, the obligations pile up fast. The most common ones:
- European Union. Digital services sold to consumers carry the VAT of the buyer's country. If your business is in the EU and you sell less than €10,000 a year to consumers in other EU countries, you can charge your own VAT; above that, you charge each country's rate and file it every quarter through the One-Stop Shop (OSS). If your business is outside the EU, there is no threshold.
- United Kingdom. A non-UK business selling digital services to UK consumers has to register for UK VAT from the first sale.
- United States. Sales tax is set by each state. Many require you to register once your sales into that state pass a threshold (often $100,000 a year), and they do not all tax digital products the same way.
None of this is impossible with a processor. Stripe and others sell tax tools that calculate the tax, but registering and filing in each country is still your job. This guide is not tax advice; an accountant who knows digital sales will sort it out better.
What it really costs: a $49.00 sale
A $49.00 product sold by a business with an account in Spain. First, to a buyer in the US, paying in dollars:
- Card fee
- Cross-border
- Conversion
- Payout
| Provider | Cost per sale | Effective |
|---|---|---|
| Stripe | −$2.74 | 5.59% |
| Paddle | −$2.95 | 6.02% |
| Lemon Squeezy | −$3.41 | 6.96% |
Stripe is still cheaper, but only by $0.21 a sale. Its 1.5% becomes much more once the card is foreign and the currency has to be converted: the cross-border surcharge and the conversion markup stack on top. Paddle includes conversion and international handling in its rate.
Now the same sale to a buyer in Germany, paying in euros:
- Card fee
- Cross-border
- Conversion
- Payout
| Provider | Cost per sale | Effective |
|---|---|---|
| Stripe | −€0.98 | 2.01% |
| Paddle | −€2.95 | 6.02% |
| Lemon Squeezy | −€4.14 | 8.45% |
Here the gap is €1.97 a sale, and in percentage terms it is huge: inside the same region and currency, Stripe only charges its base rate. Lemon Squeezy also adds a surcharge for buyers outside the US and a fee for paying you out to a non-US bank.
When each one makes sense
- Merchant of record: you sell software or digital products to consumers in many countries, nobody on your team handles tax, and most of your sales are international. The price gap is small there and the work saved is large.
- Processor: you invoice businesses (business-to-business VAT usually works by reverse charge, and the problem mostly goes away), you sell services or consulting (merchants of record usually only accept digital products), or nearly all your customers are in your own country.
- Platforms in between: Whop prices like Stripe and offers tax handling as a paid add-on. I cover it on its fee card.
If you are choosing between two, compare them on Stripe vs Paddle or Stripe vs Lemon Squeezy, with the same scenarios for both.
Every figure in this guide is calculated from the providers' public pricing pages, with the same function as the calculator. See the methodology for what the model includes and leaves out.