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PayPal vs Dodo Payments: payment processor or merchant of record, and what each costs a US LLC

PayPal and Dodo Payments compared for a US LLC: a payment processor against a merchant of record, card fees, international and currency-conversion costs, sales tax and VAT, payouts and eligibility, with worked examples on the same sale.

September 28, 2026 PayPalDodo Paymentspayment gatewaymerchant of recordsales taxUS LLC
Foundlie article cover: Payments

The short answer

PayPal is a payment processor: it moves the buyer's money to you, and you remain the seller responsible for any sales tax or VAT. Dodo Payments is a merchant of record, meaning it legally sells your product to the buyer on your behalf and therefore calculates, collects and remits the sales tax or VAT on each sale. PayPal suits freelancers invoicing clients who want to pay by PayPal; Dodo suits sellers of software and digital products who would otherwise have to handle tax in many countries.

On a $100 sale to a US card, PayPal's standard checkout keeps $3.98 and Dodo $4.40, as published on 28 September 2026. PayPal stays cheaper on an international card paid in dollars ($5.48 against $5.90), but not when the buyer pays in another currency: PayPal's conversion spread takes its fee to $8.48, while Dodo's stays at $5.90 because Dodo's buyer, not the merchant, pays the conversion fee by default.

The deciding factor is tax. If you sell digital products to consumers in many countries and do not want to register for and file sales tax or VAT yourself, the merchant-of-record fee pays for that work. If you invoice a few business clients, you are paying for something you may not need.

How they differ at a glance

PayPal Dodo Payments
Type Payment processor Merchant of record
Standard rate 3.49% + $0.49 (PayPal Checkout); cards 2.99% + $0.49 4% + $0.40 (cards and wallets)
International cards +1.5% +1.5%
Currency conversion Built into the rate, roughly 3–4% above base Buyer pays 2–4% by default, unless you absorb it
Subscriptions No surcharge in our model +0.5%
Sales tax / VAT You, the seller Dodo calculates, collects and remits
Payouts Bank transfer free; instant 1.75% (max $25) $5 under $1,000, free from $1,000; twice a month above $50
Monthly fee None on the standard account None
Who can open US LLC: US PayPal Business; Egypt accounts have limits Sellers from many countries; check Dodo's list

Figures are for a US account settling in US dollars, as published on 28 September 2026 on PayPal's business fees page and Dodo's pricing page.

Fees on the same sale

These are the worked examples from our fee model, using PayPal Checkout (3.49% + $0.49) and Dodo's card and wallet rate. "International" means a card issued outside the US; "+ FX" means the buyer pays in another currency.

Scenario PayPal Dodo Payments
$100 US card fee $3.98 / net $96.02 fee $4.40 / net $95.60
$100 international card fee $5.48 / net $94.52 fee $5.90 / net $94.10
$100 international card + FX fee $8.48 / net $91.52 fee $5.90 / net $94.10
$100 international subscription fee $5.48 / net $94.52 fee $6.40 / net $93.60
$29 US subscription fee $1.50 / net $27.50 fee $1.71 / net $27.29
$29 international subscription fee $1.94 / net $27.06 fee $2.15 / net $26.85
$1,000 international card fee $50.39 / net $949.61 fee $55.40 / net $944.60
Charge needed to net $100 (US card) $104.12 $104.58

On most rows PayPal is cheaper because its base rate is lower: 3.49% + $0.49 against 4% + $0.40. Both add 1.5% for an international card, and Dodo adds 0.5% on subscriptions where our model adds nothing for PayPal. The $1,000 row shows the percentage difference at a higher ticket.

The currency row reverses the order. PayPal builds a conversion spread of roughly 3–4% above the base rate into its exchange rate, and our model uses 3%, so the merchant bears it. Dodo's Adaptive Currency charges the buyer a 2–4% conversion fee by default; the merchant's fee does not change unless the merchant chooses to absorb that cost. The buyer may therefore pay more with Dodo than the list price suggests, and if you absorb the conversion fee, Dodo's figure rises. Neither figure includes payout costs. Try your own mix in the PayPal fee calculator, the Dodo Payments fee calculator or the all-gateways comparison.

PayPal in practice

PayPal is a wallet that buyers know. A client with a PayPal account can pay without entering card details, and some clients and platforms pay only through it. PayPal Checkout and the PayPal button cost 3.49% + $0.49, as do Venmo and PayPal Invoicing, which is the product most freelancers use to bill a client. Card payments through PayPal cost 2.99% + $0.49 on standard processing and 2.89% + $0.29 on advanced (unbranded) card processing.

Money lands in a PayPal balance. A standard bank transfer is free, an instant transfer costs 1.75% up to $25, and the standard account has no monthly fee. The chargeback fee is set per currency and waived under Seller Protection.

What PayPal does not do is act as the seller. If a sale creates a sales tax or VAT obligation somewhere, registering, charging and filing it is your job. And the conversion spread sits inside the exchange rate rather than on the fee line, so its cost is easy to miss. PayPal can also place holds or limitations on an account under its own terms, which matters more when it carries most of your income.

Dodo Payments in practice

As a merchant of record, Dodo is the legal seller on each transaction. That is why its rate is higher: 4% + $0.40 on cards and wallets, plus 1.5% for international cards and 0.5% on subscriptions. In exchange, it calculates, collects and remits sales tax and VAT, so you are not registering for tax in each country where your buyers live. ACH Direct Debit costs 1.5% capped at $15.

Payouts follow Dodo's payout structure: $5 per payout under $1,000 and free from $1,000, paid twice a month by default once the balance is above $50. Refunds cost $1 and chargebacks $30. There is no monthly fee, as listed in the pricing and fee structure documentation.

The limits are the price of the service and its fit. Paying 4% + $0.40 to invoice one business client is paying for tax handling that the client relationship may not need. The model is built for selling products to many buyers, such as software, subscriptions and digital goods; check Dodo's own pages for the products and businesses it accepts before building a store around it.

Who can use each one from Egypt or the Gulf

PayPal. PayPal operates personal and business accounts in Egypt, with limits on receiving and withdrawing; the PayPal in Egypt guide covers them. An Egyptian account follows Egyptian pricing, not the US rates here. For Saudi Arabia, the UAE and the rest of the Gulf, check PayPal's countries page. A US LLC can apply for a US PayPal Business account at the US rates in this article.

Dodo Payments. As a merchant of record, Dodo onboards sellers from many countries. The exact list of supported countries is on Dodo's own site; check it for your country, and for your company's country if you have one, before applying.

A US LLC opens the US-priced accounts described here. Foundlie forms the US LLC; the account decisions stay with PayPal and Dodo Payments, and each provider decides after its own review. Neither accepts every applicant.

Which one to choose

Choose PayPal if:

  • you are a freelancer or agency invoicing a limited number of clients who want to pay by PayPal;
  • most of your sales are in US dollars, where PayPal's conversion spread does not apply and its base rate is lower;
  • sales tax and VAT are not a practical issue for what you sell, or you already handle them.

Choose Dodo Payments if:

  • you sell software, subscriptions or digital products to consumers in many countries;
  • you want the tax on those sales calculated, collected and remitted for you;
  • many of your buyers pay in currencies other than the dollar, and you are comfortable that they pay the conversion fee.

Using both can make sense when you have two kinds of income: client work invoiced through PayPal, and a product sold through Dodo to the public. Keep each channel to the job it fits, rather than routing product sales through PayPal to save the merchant-of-record fee and taking on the tax work yourself.

Frequently asked questions

Which is cheaper for a $100 international sale paid in another currency?

Dodo Payments, for the merchant, in our model: its fee stays at $5.90 (net $94.10), while PayPal's conversion spread takes its fee to $8.48 (net $91.52), as published on 28 September 2026. By default, Dodo's buyer pays a 2–4% conversion fee, so the total the buyer pays is higher.

Is PayPal cheaper for US customers?

Yes. On a $100 US card sale, PayPal keeps $3.98 and Dodo $4.40. The difference is the price of Dodo acting as merchant of record and handling tax.

Can I use PayPal or Dodo Payments without a US company?

PayPal, within the limits and pricing of an account in your own country. Dodo onboards sellers from many countries, so check its supported-countries list for yours. The US rates in this article apply to a US account.

Do I still owe tax if Dodo is the merchant of record?

Dodo handles the sales tax and VAT on the sales it processes. Your own income tax, and the filings of any company you own, remain yours.

Which suits a freelancer invoicing clients?

Usually PayPal Invoicing, at 3.49% + $0.49, if the client wants to pay by PayPal. A merchant of record is built for selling products to many buyers rather than billing a few clients for services.

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