I wouldn't consider a citizen, subject, or vassal to be a mercenary if they were serving their own state, monarch, or feudal lord... even if they were being paid for that service. I don't think payment by itself makes someone a mercenary. A soldier is effectively being reimbursed by the entity to which he owes allegiance for the time he spends and the risk he undertakes.

Now a citizen soldier can have "mercenary" motivations, in that his primary interest is in receiving compensation for his service; but I don't think he can be considered a mercenary for serving in his own state's armed forces.

Someone serving for money in the armed forces of another state is certainly a mercenary.

I would also argue that someone who joins what is essentially a mercenary company (a business that contracts out soldiers for pay) is a mercenary even if his company is doing business with his home country. That's the case with the military professionals who are working for Blackwater and the other companies in Iraq. Even though many of the Blackwater employees are former US servicemen, they are not part of the armed forces structure of their country, and they are essentially being paid at private contractor rates through the mercenary company that employs them. Blackwater itself recruits worldwide, and its employees include mercenaries from all parts of the globe.