When someone buys from your app, one business is the legal seller. That business is the merchant of record, and it is responsible for charging and paying the right sales tax, which in the UK and EU means VAT.
Two ways to take money
You are the seller. With Stripe, the sale is yours. Stripe processes the card payment and takes a fee, but the VAT on that sale is your business's job: registering where you need to, charging the right rate and filing returns. Stripe Tax can work out the tax for you, for an extra fee, but it doesn't take on the responsibility.
Someone else is the seller. With a merchant of record such as Lemon Squeezy or Paddle, that company acts as the seller to your customer. It charges and pays the sales tax, and pays you what's left after its fee.
What it costs
A merchant of record charges more per sale, because it does more. On our Stripe vs Lemon Squeezy vs Paddle comparison, £1,000 of sales a month (50 sales of £20) costs:
| Option | Fees on £1,000 |
|---|---|
| Stripe (standard UK cards) | £25.00 |
| Lemon Squeezy | £68.72 |
| Paddle | £68.72 |
The gap, about £44 a month at that level, is roughly the price of not handling VAT yourself. Those figures were checked on 16 Oct 2026; the comparison page shows the workings.
How to choose
- Pick a merchant of record if you sell digital products to customers in many countries and don't want to register for or file VAT abroad. It suits solo founders most.
- Pick Stripe if fees matter more, you already have an accountant, or you mostly sell in one country.
- Check what the merchant of record accepts. Paddle is aimed at software sellers. Check that it accepts your kind of product, such as courses or downloads, before you build around it.
VAT rules are complicated and depend on where your customers are. Treat this page as a map, not tax advice, and talk to an accountant before you launch.