Femina testis dicit se mercatorem in taberna vidisse.

testis is a noun meaning witness (common gender: it can be masculine or feminine depending on the person). In femina testis, femina (woman) tells you the witness is female, and testis names her role: “the woman (as) a witness” / “the woman witness.”
Grammatically, this is two nouns in the nominative singular standing together in apposition (both refer to the same person).

Because testis does not change to a separate feminine form; it is a “common gender” noun. The form testis can refer to a male or a female witness, and you can specify sex with another word like femina.

dicit is present tense: “(she) says.”
If it were “said,” you’d typically see dixit (perfect tense): femina testis dixit ...

se is the reflexive pronoun in the accusative, and in indirect speech it usually refers back to the subject of the reporting verb.
So in dicit se vidisse, se = the woman witness herself: “she says that she saw...”
If you used eam, it would normally mean some other woman: “she says that she saw her.”

Latin commonly uses accusative + infinitive for indirect statements after verbs like dicit (she says).
vidisse is the perfect active infinitive of video, meaning “to have seen.”
So dicit se ... vidisse = “she says that she saw / has seen ...” (relative past compared to dicit).

Because mercatorem is the direct object of vidisse (to have seen).
Even though the clause is indirect (she says that...), the object of seeing stays in the accusative.

mercator, mercatoris is 3rd declension. Its accusative singular ends in -em, so:

• nominative: mercator = merchant
• accusative: mercatorem = merchant (as object)

taberna is ablative singular after in because here in means location (“in / inside”).

• in + ablative = where? → in taberna = in the tavern
• in + accusative = where to? (motion) → in tabernam = into the tavern

Latin word order is flexible because endings show grammar. You could rearrange without changing the core meaning, e.g.:

• Femina testis se mercatorem vidisse in taberna dicit.
• In taberna se mercatorem vidisse femina testis dicit.
  Different orders can shift emphasis (what you place earlier often feels more prominent).

Latin usually doesn’t need a separate “that” in indirect statements. Instead, it signals “that...” by using accusative + infinitive:

• dicit se vidisse literally “she says herself to have seen” → idiomatically “she says that she saw.”

The endings make it clear:

• se is accusative and is the subject of the infinitive in indirect statement (she as the one doing the seeing)
• mercatorem is accusative as object of vidisse
  If the merchant were the one who saw her, you’d expect something like:
• Femina testis dicit mercatorem se vidisse. = “...that the merchant saw her.”
  Here mercatorem would be the subject of the infinitive (the merchant) and se the object (her).