Payment plumbing

You have a price and a revenue shape. Between those and a stranger’s money there is a stretch of plumbing that has almost nothing to do with code: an account somebody has to verify, a question about whether you are a business, a tax obligation that can attach to a single sale, and a decision about who the customer is legally buying from. Most of it is invisible until the first payment, and a couple of the choices cannot be undone afterwards.

This lesson is a map of that stretch. It is deliberately not a walkthrough, because the honest version of a walkthrough would be wrong for most of the people reading it.

What has to exist before a stranger can pay you

Less than a first-timer expects, and more than a checkout button.

The account is a verification gate, not a signup form

Take Stripe as the worked example, with the obvious caveat that every figure in this section is Stripe describing Stripe’s own product and Stripe’s own pricing. Accurate as published; also written by a company with an interest in the numbers looking simple.

Stripe’s activation docs describe three steps — create the account, complete the checklist, and verify your business in the Dashboard, which means providing “information about your business, product, and relationship to the business.” Stripe attributes this to its own obligations: “Our ‘Know Your Customer’ (KYC) obligations require us to collect and maintain this information for all users.” Note what is not on that page: a requirement that you be a registered company. Verification is the gate, not incorporation.

The same page lists what becomes visible to your customers — business name, website URL, a support email, phone or address, a support site, and the statement descriptor that appears on the card statement. For a solo project that is a small privacy decision made at signup and rarely thought about again.

The cut, and why naming the market is not pedantry

The number everybody quotes is 2.9% + $0.30 per successful transaction on domestic cards. That is the rate on Stripe’s US pricing page, and it is the US rate. The same company’s UK pricing page lists 1.5% + 20p on UK domestic cards — roughly half the percentage. Quote “2.9% + 30¢” as though it were a global constant and you are wrong for a UK-based seller by a factor of about two on the percentage component, in a direction that makes their product look worse than it is.

The surcharges are where a cross-border sale actually lands:

• US account: +1.5% for international cards, +1% for currency conversion, +0.5% for manually entered cards.
• UK account: 2.5% + 20p for EEA cards and 3.15% + 20p for international cards, each +2% if currency conversion is involved.

So a $20 sale to a consumer in France, on a US account, is charged 2.9% + 1.5% + $0.30 — $1.18, or about $1.38 once conversion is in play. Hold that number; it comes back when the merchant of record turns up. And whatever it is, it belongs in the project’s economics next to the maintenance figure the glossary pins down, not in a mental category called “fees, whatever.”

The money does not arrive on the day of the sale

Stripe’s payouts documentation says a new account’s first payout typically lands 7–14 days after the first successful payment, and longer depending on industry risk and country. Only once the account is established does the rolling schedule apply, and even that is market-specific: T+2 business days in the US and Australia, T+3 in most other countries, T+4 in Japan, T+7 in Thailand. The 7–14 day wait is the one that surprises people, because it arrives at exactly the moment they most want proof the thing works.

Do you need a company to take $50?

This is jurisdiction-dependent and there is no general answer. What follows is two examples, chosen because they are the two most likely to apply to a reader of this course. They are two examples, not a pattern. If you are in Germany, India, Canada, Australia or anywhere else, this section tells you nothing about your own position — and assuming it generalises is the mistake it is written to prevent.

United States

The Small Business Administration puts it flatly: “You’re automatically considered to be a sole proprietorship if you do business activities but don’t register as any other kind of business.” The IRS (page last reviewed 28 June 2026) defines a sole proprietor as “someone who owns an unincorporated business by themselves,” and routes them to Form 1040 with Schedule C for profit or loss, Schedule SE for self-employment tax, and Form 1040-ES for estimated tax.

Read that precisely. It says formation is not a precondition to being taxed; the sole proprietorship is what you already are by default. It says nothing about whether forming an entity is a good idea, and the SBA hedges even the headline benefit: an LLC protects you from personal liability “in most instances.” A sole proprietorship offers no separation at all — “your business assets and liabilities are not separate from your personal assets and liabilities.”

United Kingdom

gov.uk describes the sole trader the same way: you are classed as self-employed, you keep the profits after tax, and you carry unlimited liability — personally responsible for business debts. No company formation required.

The difference from the US example is that there is a bright-line number attached: the same page states you must register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year (6 April to 5 April). That is gross trading income, not profit — a distinction that catches people who net a few hundred pounds and assume they are under it. Hold that figure the same way you should hold every number in this section: the page it comes from carries no last-updated date at all, and whether the threshold still stands for the current tax year is not something a course page can confirm for you. The separate trading-allowance relief that sits alongside it gets the same treatment, which is why this course prints no figure for it either — gov.uk’s guidance page for that allowance was last updated in 2019. Read both live pages before relying on either number.

The tax tail

Here is the part that surprises builders: for a digital product sold to consumers, the tax question is usually decided by where your customer is, not where you are. That is a structural difference from selling your labour, and it is why a single stranger with a card can create an obligation in a country you have never been to.

The EU: there is no threshold at all for a non-EU seller

The European Commission states the rule plainly: business-to-consumer supplies of telecommunications, broadcasting and electronic services “are taxed where the customer resides” — Article 58 of the VAT Directive.

There is a €10,000 relief, and it is the source of nearly every misunderstanding on this topic. Article 59c disapplies Article 58 where cross-border sales stay under €10,000 in a calendar year — but only where the supplier “is established or, in the absence of an establishment, has his permanent address or usually resides only in one Member State.” A seller outside the EU cannot satisfy that condition. The Commission’s page says so in terms: the threshold applies to suppliers established in one EU country, “not to suppliers outside the EU.”

So the accurate statement is not that the threshold is zero. There is no threshold at all. The €10,000 figure is an EU-establishment relief that never reaches you; Article 58 applies from the first sale, and a single €5 sale to a consumer in a member state can create a VAT obligation in that member state.

What exists instead is a filing simplification. The non-Union One Stop Shop scheme is open to “any taxable person, not established in the EU, who supplies services to non-taxable persons taking place in the EU” — register in one member state, file one return covering all of them, instead of registering in each. Two things it is not: it is not an exemption (the VAT is still due at the customer’s member-state rate), and it is not IOSS. IOSS is the import scheme, for distance sales of imported goods in consignments of €150 or less. Digital services are not goods and are not imported. The two get used interchangeably constantly, and they solve different problems.

The UK: the same trap, running the other direction

Everyone knows the UK VAT registration threshold is £90,000. Fewer people read the next paragraph on the same gov.uk page, which says you must also register regardless of taxable turnover if you are based outside the UK, your business is based outside the UK, and you supply any goods or services to the UK.

Structurally identical to the EU point: the friendly-sounding small-business threshold is a domestic relief, and it is not available to you when you are the foreign one. Note that the direction flips depending on where you sit. A UK-based seller has £90,000 of headroom in the UK and none in the EU. A US-based seller has none in either.

HMRC’s guidance on digital services to private consumers (last updated 28 March 2022 — check it, it is old) also supplies the most useful distinction in this whole lesson, the automation test. A digital service must be “automatically delivered over the internet, or an electronic network, where there’s minimal or no human intervention.” A pre-recorded course delivered automatically qualifies. The same material taught live by a tutor does not. Two products that feel identical to their maker can land on opposite sides of that line, and the line has money attached.

The US: two questions, not one

There is no federal sales tax and no national threshold. Each state sets its own economic nexus rule, and the numbers rhyme without matching:

• California — $500,000 in combined sales for delivery into the state, preceding or current calendar year, with no transaction-count trigger.
• New York — $500,000 in gross receipts and more than 100 sales, over the immediately preceding four sales tax quarters. Both conditions must be met.
• Texas — $500,000 in total Texas revenue over the preceding twelve calendar months, measured on gross revenue from taxable and nontaxable sales of tangible personal property and services.

Three states, three rules, all nominally $500,000, and not the same $500,000: different lookback periods, different measures, and a transaction count in one of them. The 200-transaction figure people remember from South Dakota v. Wayfair is not a US rule — California has no count at all and New York uses 100.

Now the part that gets conflated, and this is the subtlest thing on the page. Nexus and taxability are separate questions. Crossing a state’s threshold tells you that state can require something of you. It does not tell you the product is taxable there. California’s CDTFA (publication 109, revised July 2026) says sales of “electronic data products such as software, data, digital books (eBooks), mobile applications, and digital images are generally not taxable when you transmit the data to your customer over the Internet” — but that if you also hand the customer a printed copy or a backup on a flash drive, “your entire sale is usually taxable.” A USB stick in the box flips the whole transaction.

Two independent variables, fifty-odd jurisdictions, and a legislature in each one. Naming the two variables is the useful thing a course can do here. Answering them for your business is not.

Merchant of record: making the tail somebody else’s problem

There is a category of service that responds to all of the above by changing who the seller is. Read this section with the vendor flag on the whole of it: Paddle and Lemon Squeezy sell exactly the service being described here, and their own marketing is the source of nearly every claim in it. Their descriptions of their legal position are credible — it is the basis of their business model and it is contractually real — but phrases like “all the tax-related risk rests with Paddle” are marketing formulations of a contract, not neutral legal findings.

Lemon Squeezy’s own docs give the cleanest definition: a merchant of record is “the legal entity selling goods or services to an end customer”, responsible for “collecting sales tax, processing refunds and chargebacks, and ensuring PCI compliance.” Paddle describes the same structure as a resale: “Paddle acts as a reseller of your product, and is, therefore, the ‘seller on record’”, and will be “responsible for the collection and payment of VAT and tax instead of you.” Paddle says it is registered in over 100 jurisdictions.

That is a real answer to the EU and US sections above. It is also not free, and the headline is not the rate.

The headline rate and the real one

Both vendors headline 5% + $0.50 per transaction — Paddle’s pricing page and Lemon Squeezy’s fees page. Lemon Squeezy’s page then adds the surcharges: +1.5% on international transactions, +1.5% on PayPal, +0.5% on subscriptions, plus payout fees (free to US bank accounts, 1% per payout to non-US ones) and marketing surcharges on top of that.

The compounding detail is the fee base. Their own worked example: a $20 product sold into France, their assumption of 20% VAT, total charged $24.00, platform fee $2.06, net $17.94. The 5% is charged on the VAT-inclusive total, not the ex-tax price, so the fee on that sale is 10.3% of the product price — arithmetic from the vendor’s own documentation, roughly double the headline.

Set that against the same $20 sale on Stripe: $1.18 of processing, and every one of the obligations in the tax-tail section still yours to discover, register for, and file. The comparison is not 5% against 2.9%. It is an all-in fee against a smaller fee plus your own compliance, and the second term is the one nobody prices.

One practical limit worth knowing before you design around it: neither vendor offers standard pricing on products under $10. Both route sub-$10 products to their sales teams. If the plan was to sell a $5 thing, the merchant-of-record path does not start where you thought it did.

The live case: what a platform decision costs later

This course keeps claiming that platform dependency has a delayed price. Here it is happening in public, documented by the vendor itself.

Stripe acquired Lemon Squeezy in 2024. In a post dated 28 January 2026, CEO JR Farr writes that “our goal is to provide Lemon Squeezy users an easy way to migrate to Stripe Managed Payments,” and acknowledges that the acquisition “meant some tradeoffs for the Lemon Squeezy community: slower support responses and less frequent product updates.” The same post says Managed Payments supported merchants in 35+ countries at that date, on a waitlist and invite basis.

Stripe’s own Managed Payments documentation confirms the structure: in a comparison table, the merchant of record under Managed Payments is Stripe, where under other Stripe products it is your business. It claims sales tax, VAT and GST compliance in more than 80 countries. It also lists what the product does not support — Stripe Connect, embeddable web components and advanced integrations, third-party tax integrations, one-off invoices, and subscriptions created outside Checkout or Payment Links. This course prints no rate for it, because none is published on that page.

Nobody did anything wrong here. A seller who chose Lemon Squeezy in 2023 made a reasonable choice, and three years later the company that legally sells their product is being wound toward a different product, with the service degradation admitted by its own CEO. That is what “expensive to change later” looks like from the inside, and it is why the next section is the point of the whole lesson.

What is expensive to change later

Most of the plumbing is reversible on a slow afternoon. These are not:

• Your processor account’s business origin country. Stripe’s own activation docs: “After activating a Stripe service on a live account, you can’t change the business origin country. To use a different supported country as your primary business location, create a new account.” A field on a signup form, filled in without thought, that later requires abandoning an account with live customers on it.
• Whether an entity exists, and where. Forming one later is possible; unwinding the tax history of having traded personally first is a different conversation, in a jurisdiction you have already committed to.
• Who the seller of record is. This is not a settings toggle. It decides whose name appears on the customer’s card statement, who the customer contacts for a refund, who holds the receipts, and who the tax authority looks at. Switching later means migrating live subscriptions between two legal sellers.
• The currency you price in. Changing it later re-prices every existing customer, which is a support event before it is a pricing decision.
• The platform itself. See the case above. Your customer list, your billing history and your legal seller can all live inside one vendor’s account, and vendors get acquired.

Now write the path down

What this does not cover

You now know what has to exist before a stranger can pay you, roughly what it costs, who carries the tax, and which four or five choices you should make deliberately because they harden. What none of it settles is the question a visitor actually faces on your site: what do I get for free, and what do I have to pay for?

That boundary is next — where the free/paid line falls, and why drawing it in the wrong place produces a large, happy, permanently non-paying audience while the plumbing on this page sits idle.