Selling software to people in other countries creates tax obligations in those countries. EU VAT applies from the first euro of digital sales to EU consumers. The UK, Australia, Norway, Japan and many US states have their own rules. Registering, collecting and filing in each one is a real cost for a two-person company.
A merchant of record (MoR) takes that cost. Lemon Squeezy is one.
How the sale actually works
- The customer buys from Lemon Squeezy. Its name is on the card statement and on the invoice.
- Lemon Squeezy calculates the tax for the customer's location, charges it, files it and remits it.
- Lemon Squeezy pays you the proceeds, minus its fee and the tax.
You have one customer for tax purposes: Lemon Squeezy. That is the whole point.
What moves off your plate
- Registering for VAT, GST and US sales tax in places you sell to.
- Calculating the right rate per buyer, including B2B reverse charge when the buyer enters a valid VAT id.
- Filing the returns and paying the tax to each authority.
- Issuing a compliant tax invoice to the buyer.
- Chargebacks and fraud screening, which Lemon Squeezy handles as the seller.
What does not
- Your own income tax. Lemon Squeezy payouts are revenue for your company. Report them where you are based.
- The tax category of each product. Lemon Squeezy picks the rate from the category you set (SaaS, eBook, software/eService). A wrong category can mean a wrong rate. That one is on you.
- Your terms and your support. You still own refunds policy, the product, and the relationship.
Prices: tax-exclusive by default
By default the price you set is before tax. A $20 plan costs a German consumer $23.80 at checkout (19% VAT). Stores can switch to tax-inclusive pricing, where the $20 includes VAT and your payout shrinks by country.
Either way, the number on your pricing page is not always what the card is charged. Say so: "plus tax where applicable" under the price costs nothing and prevents the most common pre-sales email.
Recording money in your own books
Order and invoice payloads carry subtotal, tax, total and the _usd
versions of each. Record total (what the customer paid) on your purchase
rows so they reconcile against the dashboard. Your payout is total minus tax minus the
fee, and the payout report is where that net number lives. Do not try to
compute the fee yourself: it varies by payment method and card country.
Store amounts as integers in minor units, with the currency next to them. A
store has one currency, but currency_rate and the _usd fields exist because
reports are in USD.
Don't send your own "invoice"
Your receipt email is a courtesy. Call it a receipt, not an invoice, and point to the Lemon Squeezy invoice for tax purposes. Two documents that both claim to be the invoice, with different seller names, is how an accountant's afternoon disappears.
When MoR stops being worth it
The convenience has a price: 5% + 50c against roughly 3% for a card processor. Past about $30k to $50k a month, a processor plus a tax-compliance vendor can cost less, and you gain your own name on the statement. That is a good problem and a later one. Until then, the fee buys you not having to think about VAT.