Some tokens charge a fee on every buy, sell or transfer, written into the contract. The project keeps the fee. A 5% sell tax means you lose 5% the moment you sell, on top of normal exchange fees and price moves.
What's normal
- 0%: most established tokens. Bitcoin, Ethereum, stablecoins and the major coins have no built-in tax.
- 1% to 5%: common on meme and "reflection" tokens. Not a scam by itself, but it eats into any gain.
- Over 10%: a red flag. You need a 10% gain just to break even.
- Over 50%: effectively a honeypot. We mark these JUNK.
The quieter danger: changeable taxes
Some contracts let the owner change the tax at any time. A token can launch at 2% and move to 99% once enough people have bought. We flag this as taxes can be changed, and treat it as a serious warning unless the owner has given up control.
Rule of thumbIf you can't say why a token needs a tax, it doesn't. The tax is the product.