Lemon Squeezy vs Paddle

Lemon Squeezy

Merchant of record for selling digital products and SaaS

Lemon Squeezy is a merchant of record for digital products and SaaS: it hosts the checkout, runs the subscription billing, and takes legal responsibility for collecting and remitting sales tax, VAT, and GST worldwide on the seller's behalf. What does "merchant of record" actually change? With a plain payment processor, the seller is the one selling, so the seller is the one who must register for VAT in the EU, GST in Australia, and sales tax in whichever US states they cross a nexus threshold in. With a merchant of record, Lemon Squeezy is the legal seller of record, so those registrations and filings are its problem, not the founder's. For a solo developer selling a $29 app to customers in forty countries, that difference is the entire reason the product exists. Pricing is transaction-based, not subscription-based. Ecommerce transactions are 5% + 50c per transaction, with no monthly platform fee and no contract or trial period. That is materially more than raw card processing costs, and the gap is the price of the tax handling, fraud screening, and the hosted storefront. What it includes beyond checkout: subscriptions with dunning, usage-based billing, a self-service customer portal, discount codes, pay-what-you-want pricing, lead magnets for free products, a built-in affiliate programme, hosted and overlay checkouts, and a full online storefront. Lemon Squeezy was acquired by Stripe in 2024, and in 2026 the two product lines converged under Stripe Managed Payments. Anyone evaluating Lemon Squeezy now should read that convergence as part of the decision rather than a footnote: the underlying processor and the long-term roadmap are Stripe's. Who it is for: indie developers, small software companies, course and template sellers, and any team selling globally that does not want a finance function. It is a poor fit for physical goods, for businesses that already have tax counsel and want the lowest possible processing rate, and for anyone in a country Stripe does not support, since the acquisition ties the two. How it compares: Paddle is the closest direct competitor and also a merchant of record, generally priced around 5% + 50c, and is usually the alternative teams shortlist alongside it. Stripe itself is cheaper per transaction but is a payment processor, not a merchant of record, so tax compliance stays with the seller unless Stripe Tax and Managed Payments are added. Gumroad is simpler and better for one-off creator sales but weaker on subscriptions and developer APIs. FastSpring and Polar occupy the same merchant-of-record space with different fee structures. The decision usually comes down to one question: is 5% cheaper than the accountant, the registrations, and the filings you would otherwise need?

Paddle

Payments and merchant of record for software companies

Paddle is a merchant of record for software companies, which means it becomes the legal seller of your product and takes over sales tax registration, filing, and remittance worldwide, in exchange for a flat 5% + 50 cents per checkout transaction. The distinction between a merchant of record and a payment processor is the whole point and is worth being precise about. A payment processor such as Stripe moves money and leaves you legally responsible for collecting and remitting VAT, GST, and US sales tax in every jurisdiction where you have customers. A merchant of record sells the product to the customer on its own account, so the tax liability, the registrations, the filings, and the compliance risk are Paddle's rather than yours. For a two-person SaaS selling to 40 countries, that is the difference between one invoice and a tax advisory relationship. Pricing is 5% + 50 cents per checkout transaction, with no migration fees, no monthly fees, and no hidden extras. That single fee covers tax compliance, fraud protection, customer support, churn recovery, and the billing infrastructure itself, with no add-on charges listed for standard features. Products priced under $10, and those requiring invoicing, fall outside the standard rate and need custom pricing arranged through sales. The tradeoff is straightforward. Paddle's 5% + 50 cents is meaningfully more than Stripe's headline card rate. What you are buying with the difference is the removal of an entire compliance function, plus failed-payment recovery and buyer support that you would otherwise staff. Whether that is good value depends almost entirely on how many jurisdictions you sell into and how much your time is worth. Who it is for: SaaS companies, desktop software vendors, and digital product businesses selling internationally, particularly small teams without a finance department. It is especially common among bootstrapped founders in countries where opening a Stripe account is difficult or impossible, because Paddle's own entity handles the merchant relationship. How it compares: Stripe is cheaper per transaction and far more flexible as a developer platform, but leaves global tax entirely to you unless you add Stripe Tax and do the registrations yourself. Lemon Squeezy is the closest merchant-of-record competitor and is now Stripe-owned, with a similar fee structure and a lighter, more indie-friendly product. Polar is a newer merchant of record aimed at developers, starting at 5% + 50 cents on its free tier and falling to 3.4% + 30 cents on higher paid plans. FastSpring is the established enterprise-leaning option. Against these, Paddle's strengths are maturity, subscription billing depth, and a genuinely complete tax posture; its weakness is price at volume and a heavier onboarding review than a self-serve processor. Evaluate it the moment international VAT becomes something you have to think about rather than something you can defer.