Sales Tax and VAT
Lemon Squeezy is known as the merchant of record for all sales through our platform. That means we take care of a lot of the headaches that are normally associated with selling goods online.
For example, you don’t have to worry about collecting and remitting sales tax (including international tax like VAT) as Lemon Squeezy simply takes care of it for you. This is possible because Lemon Squeezy is technically selling products on your behalf and therefore we are liable for all of the complicated bits.
This makes your life that much simpler.
Sales tax will appear in your orders and invoices in Lemon Squeezy so you can see when we’ve charged sales tax. If sales tax has been applied to an order, we will deduct it from your next payout so that we can report and remit it.
For example, say you sell a product for $15. Someone in the UK purchases your product and Lemon Squeezy adds 20% VAT ($3) to the order total. The order total is now $18.
This is how tax, fees and profit are calculated:
| Description | Amount |
|---|---|
| Subtotal | $15.00 |
| Tax (20% VAT) | $3.00 |
| Total | $18.00 |
| Lemon Squeezy platform fee ($0.50 + 5% of total + 1.5% int’l payment) | $1.67 |
| Net profit (total - tax - platform fee) | $13.33 |
Tax-inclusive pricing
Lemon Squeezy allows you to set tax-inclusive pricing for your products. This means that your customers will be charged the set price of your product, regardless of any tax amount applied at checkout. For example, if you set a price of $15 and tax-inclusive pricing is enabled, then the price of your product will be $15, including any taxes. If tax-inclusive pricing is disabled, then the price of your product will be $15 plus tax.
Here’s an example:
| Description | Amount |
|---|---|
| Subtotal | $15.00 |
| Tax (20% VAT) | $2.50 |
| Total | $15.00 |
| Lemon Squeezy platform fee | $1.56 |
| Net profit (total - tax - platform fee) | $10.94 |
Tax-inclusive pricing can be enabled in your store General Settings. The setting applies across all products in your store. For subscriptions, all future invoices will be generated with the correct tax applied based on your tax-inclusive pricing setting. Old invoices will not be updated.
Do I need to report and pay tax?
As Lemon Squeezy is a merchant of record, you shouldn’t need to report sales tax for sales you make through Lemon Squeezy.
However, you may need to pay tax on the income you receive from Lemon Squeezy in the form of payouts. Each business is different, so we recommend you get some legal advice from a tax expert in your country to find out exactly where you stand on this.