Take payments

Why this step matters

Until money arrives, you have users, not customers. Taking payments looks simple, but the choices you make here decide your fees, how much tax admin you carry, which countries you can sell to and how many renewals you lose to failed cards. The biggest decision for software and digital products is whether to use a payment processor directly or a merchant of record.

How to do it

1. Understand the two models.
2. A payment processor (such as Stripe, PayPal or Adyen) moves the money; your company is the seller. You are responsible for collecting and filing sales tax, VAT or GST wherever you have to, handling invoices and dealing with chargebacks.
3. A merchant of record (MoR, such as Paddle or Lemon Squeezy) legally resells your product to the customer. The MoR appears on the card statement, calculates and remits sales tax and VAT around the world, and handles many compliance tasks; you receive payouts. The fee is usually higher than a processor's, but it can replace tax registrations in many countries.
4. Choose based on your customers. Selling mostly to businesses in your own country, or physical goods, usually suits a processor. Selling digital products to consumers in many countries, as a small team, is where a merchant of record saves the most work.
5. Compare total cost, not the headline rate. For example, Stripe's own US pricing page lists 2.9% + 30 cents per successful domestic card charge, plus 1.5% for international cards and 1% when currency conversion is needed, and Stripe Billing as a separate fee. Add tax tools, billing, invoicing and dispute fees to compare fairly.
6. Open a business bank account first and connect it for payouts. Processors verify your company, owners and website, so have your company details, tax ID and a live site with pricing, terms, privacy policy and refund policy.
7. Use hosted checkout or payment links. Hosted pages keep card data off your servers, which keeps your PCI compliance burden low, and they support wallets such as Apple Pay and Google Pay.
8. Set up subscription billing. Create products and prices that match your tiers, trials and annual plans, a customer portal for upgrades and cancellations, and dunning: automatic retries and emails for failed payments.
9. Handle tax deliberately. In the US, sales tax on software depends on the state and on whether you have economic nexus there. In the UK and EU, VAT applies to digital services sold to consumers, generally based on the customer's location. Use a tax tool or a merchant of record, and ask an accountant where you are registered.
10. Test everything. Run test mode, then a real purchase and refund with your own card, and check receipts, invoices, webhooks and your accounting export.

What it costs and how long it takes

Setup is free with most processors; you pay per transaction. Verification and integration take a day to a week. Merchants of record usually charge a higher all-in percentage that includes tax handling; check each provider's pricing page for current numbers.

Free credits, perks and services that help

Compare processors, merchants of record and billing tools in /best/payments-billing. Some providers offer fee-free processing up to a limit for startups in partner programmes; check /perks and /programs. Business accounts are in /best/banking, and bookkeeping and tax help in /best/accounting-tax.

Processor or merchant of record at a glance

A processor is usually cheaper per transaction and gives you full control over checkout, invoices and customer data, but you own the tax registrations, filings and compliance work. A merchant of record costs more per sale but takes over most international tax collection and remittance, invoicing to tax rules and part of the fraud and dispute handling. Many startups start with a merchant of record to sell globally from day one, then move to a processor plus tax software when volume makes the fee difference worth an in-house finance process. Whichever you pick, keep your product and price catalogue clean so a later migration is possible.

Common mistakes

• Forgetting tax. Back taxes on digital sales can arrive years later with penalties.
• No dunning. Failed renewals quietly cost recurring revenue.
• Building your own billing logic. Proration, upgrades and refunds are harder than they look.
• Missing policies. Processors may pause payouts if your site lacks clear terms, pricing and refund policies.
• Choosing on headline rate only. International cards, currency conversion and billing fees add up.

Go deeper

Monetizes covers payment-led models such as subscriptions, digital products and memberships, and the platforms that run them: monetizes.net.