Crypto glossary
Buy/sell tax token
A tax token charges a percentage on every buy or sell, sending it to the team, liquidity or holders; extreme or changeable taxes are a classic scam signal.
The tax is coded into the token's transfer function: when tokens move to or from a DEX pair, the contract keeps a slice and routes it to a marketing wallet, the liquidity pool, a buyback or reflections. Typical launch taxes range from 1 to 10%, and some projects start high to deter bots and lower them later. Traders must raise their slippage tolerance or the swap fails.
Taxes are common on memecoins and small-cap launches on Ethereum, BNB Chain and Base, where they fund the team without a presale. Token security scanners and DEX screeners display the current buy and sell tax so buyers know how much they lose on each trade.
The danger is that many contracts let the owner change the tax at any time. A token that launches at 5% can be switched to 99% on sells, turning it into a de facto honeypot where holders can buy but not exit. Hidden taxes, separate rates per wallet and blacklists are red flags, and renounced ownership only helps if no other admin function remains.
Example
A trader buys a new memecoin with a 5% buy tax; a day later the owner raises the sell tax to 90%, and her attempt to sell returns almost nothing.