Taking money for a solo SaaS
Everyone compares the percentages. The percentage is the least important line. The question that actually decides it is who is on the hook for sales tax in twenty jurisdictions.
The short version
- The real question is merchant of record, not fees. A gateway leaves tax to you; a merchant of record takes the liability.
- Stripe is cheaper and yours. Roughly 2.9% + 30¢, plus whatever tax handling costs you in time or add-ons.
- Paddle and Lemon Squeezy charge about 5% and file the VAT returns you do not want to learn about.
- Two extra points of revenue is cheap until you are at real volume; then the arithmetic flips.
- Pick the boring one and ship. Payments are migratable; a year lost to deliberating is not.
What is the actual difference between these?
Stripe is a payment gateway: your company sells the software, and you owe the sales tax and VAT everywhere you have obligations. Paddle and Lemon Squeezy are merchants of record: they legally sell the software to your customer, and they carry the tax obligations. The fee difference is the price of that transfer.
This distinction is buried under pricing-page marketing, and it is the only thing about the decision that is difficult to reverse. Everything else (the checkout design, the subscription logic, the invoices) is roughly comparable.
| Gateway (Stripe) | Merchant of record (Paddle, Lemon Squeezy) | |
|---|---|---|
| Who sells to the customer | You | Them |
| Sales tax and VAT | Your problem, everywhere | Their problem |
| Whose name is on the statement | Yours | Theirs, with your product named |
| Chargeback handling | You fight it | They handle it |
| Typical cost | ~2.9% + 30¢ | ~5% + 50¢ |
| Payout control | Direct, rolling | Scheduled, with a threshold |
The 2% gap is what you are paying for the tax work. Whether that is expensive depends entirely on how much revenue you have and how much you value not reading about EU VAT thresholds on a Sunday.
Why does sales tax matter so much for software?
Because digital services are taxed where the buyer is, not where you are. Sell to a consumer in Germany and German VAT applies from the first euro, with no threshold. A one-person company can accumulate filing obligations in dozens of jurisdictions without noticing.
This is the part solo founders discover late, usually in year two, usually from an accountant. The rules vary and they change, so treat everything below as the shape of the problem rather than tax advice. A local accountant is worth an hour of your money here.
- EU VAT on digital services is charged at the customer's local rate, and for B2C sales there is no minimum before it applies.
- US sales tax varies by state, and several states now tax SaaS with economic nexus thresholds you can cross on volume alone.
- The UK, Canada, Australia, Norway, Japan and others each have their own registration regimes for foreign digital sellers.
- B2B sales inside the EU shift the liability to the buyer through the reverse charge, but only if you validate their VAT number, which is a thing you now have to build.
This is what the extra 2% buys. Not a nicer checkout. Someone else registering, collecting, filing and being audited in places you have never been.
Stripe does sell a tax product that calculates and, at additional cost, files in some jurisdictions. It narrows the gap considerably, but the legal obligation stays yours, and that is the part that cannot be outsourced with a toggle.
What does each one actually cost?
Stripe is around 2.9% plus 30¢ for cards, with extra for currency conversion. Paddle and Lemon Squeezy are around 5% plus 50¢, tax included. Always check current published rates before you plan around them: these move.
At the scale most solo products live at, the difference is smaller than the anxiety about it:
| Monthly revenue | Stripe (~2.9%+30¢) | MoR (~5%+50¢) | Difference |
|---|---|---|---|
| $500 (25 × $19) | ~$22 | ~$38 | ~$16/mo |
| $2,000 (100 × $19) | ~$88 | ~$150 | ~$62/mo |
| $10,000 (500 × $19) | ~$440 | ~$750 | ~$310/mo |
| $50,000 (2,500 × $19) | ~$2,200 | ~$3,750 | ~$1,550/mo |
Read the first two rows and the last one together. At $500 a month, the merchant of record costs you a takeaway meal and removes an entire category of problem: take it. At $50,000 a month, it costs about $18,000 a year, which is enough to pay an accountant to handle registrations properly and still have most of it left.
Note that Stripe acquired Lemon Squeezy in 2024, so the two are no longer independent companies even though they remain distinct products. Check what is actually being offered on both sites before you decide; this is exactly the sort of arrangement that gets restructured.
Which one should you actually pick?
Under roughly $10k a month, take a merchant of record and stop thinking about it. Over that, model the fee against what compliance genuinely costs you. If you sell mostly B2B to your own country, Stripe plus an accountant is often the better deal at any size.
| Your situation | The pick |
|---|---|
| First product, global consumers | Merchant of record. The tax problem is worse than the fee |
| B2B, one country, invoices needed | Stripe. The tax picture is simple and the fee is half |
| Mobile app with in-app purchase | Neither: the stores take 15–30% and you have no choice |
| One-time licence, worldwide | Merchant of record. Same tax exposure, less recurring logic |
| Over $30k/mo, mixed markets | Stripe plus real tax tooling and an accountant |
| You have not launched | Whichever you can integrate today |
The last row is the honest one. The number of solo products that failed because of a payment processor choice is approximately zero. The number that never launched while the founder read comparison articles is not.
Migrating is annoying, not fatal. Existing subscriptions usually have to be re-authorised by the customer, which costs you some churn. It is a bad week, not a rebuild, and it is a problem you only get to have if you launched.
What else should you check before committing?
Whether your country is supported for payouts, whether your category is allowed, how refunds and chargebacks are handled, and whether you can export your customer and subscription data. That last one is what decides how expensive leaving will be.
- Payout country. Not every processor pays out everywhere, and this is a hard stop rather than an inconvenience.
- Prohibited categories. Read the acceptable use policy properly. Finding out after launch means a frozen balance.
- Payout schedule and threshold. Merchants of record commonly pay monthly with a minimum; that changes your cash flow if you are living on it.
- Failed-payment recovery. Involuntary churn from expired cards is a real percentage of revenue, and good dunning recovers a lot of it.
- Data export. Can you get customers, subscriptions and payment history out in a usable form? If not, the fee difference stops mattering.
- Currency handling. Charging in local currencies lifts conversion and adds a conversion fee. Know which one you are getting.
Failed payments deserve more attention than they get. For a small subscription product, a meaningful slice of monthly churn is nothing but expired cards. How to reduce churn in a small SaaS covers the recoverable part of that.
Does the pricing model change the answer?
Yes, at the edges. One-time payments make a merchant of record cheaper in aggregate, because you pay the fee once per customer rather than monthly. Subscriptions compound the percentage, which is what eventually pushes larger products towards a gateway.
Two customers, both worth $228 over a year (one paying $19 a month, one paying $228 once) cost different amounts to collect. The subscription pays the fixed 50¢ twelve times; the one-time payment pays it once. On small ticket prices, the fixed component is doing more damage than the percentage.
| Model | Fee impact | Note |
|---|---|---|
| $9/mo subscription | Fixed fee is ~5.5% on its own | Small monthly prices are expensive to collect |
| $29/mo subscription | Fixed fee is ~1.7% | The percentage dominates |
| $149 one-time | One fixed fee, ever | Cheapest to collect |
| $5 add-on purchase | Fixed fee is 10% | Bundle these, or do not sell them |
Which is another reason very cheap monthly tiers are a bad idea for a one-person product: the payment processor takes a disproportionate cut, and the support load does not scale down with the price. Subscription or one-time pricing is the fuller version of that argument, and SaaS pricing for solo founders is where the tier structure gets decided.
Frequently asked questions
Is Stripe cheaper than Paddle or Lemon Squeezy?
On the headline rate, yes: roughly 2.9% + 30¢ against about 5% + 50¢.
What is a merchant of record?
A company that legally sells your product to the customer on your behalf. They appear on the buyer's statement, they collect and remit the sales tax, and they carry the compliance liability.
Do I really owe VAT on a $9 subscription to someone in France?
For a B2C digital sale into the EU, yes. The rules apply from the first sale, with no threshold. This is precisely the problem a merchant of record exists to absorb.
Can I switch processors later?
Yes, and plenty of products have. The cost is that existing subscribers usually have to re-enter payment details, which loses you some of them.
What about mobile apps?
If you sell a subscription inside an iOS or Android app, the store's billing is generally mandatory and takes 15–30%. None of the processors above change that.
The system behind this, written down
Everything above is the map. The Income Loop is the work inside it: modules 0–6 from the problem you solve to the offer that pays for it, plus ten traffic paths: the deeper post banks, the content sales systems and the full software build sequence, in one place.
Get The Income LoopNot ready to pay for anything? The Basic Income Loop is free and includes a complete seven-day starter for Threads, Instagram or software, enough to find out which one suits you before spending anything.