Overview
Tax tokens implement transaction fees (taxes) on buys, sells, or transfers. While some taxes are legitimate (funding development, marketing, or liquidity), malicious tokens use extreme or hidden taxes to steal from traders.
Always check a token’s buy and sell taxes before trading. Taxes can be modified at any time by malicious owners.
How Tax Tokens Work
- Tax Implementation: Contract includes fee logic on transfers
- Fee Collection: Percentage taken on each buy/sell/transfer
- Distribution: Fees go to designated wallets or contracts
- Legitimate Use: Fund development, marketing, burns, reflections
- Malicious Use: Drain trader funds through excessive fees
Types of Token Taxes
Buy Tax
- Fee charged when purchasing the token
- Typically ranges from 0-10% for legitimate tokens
- Malicious tokens may have hidden or extreme buy taxes
Sell Tax
- Fee charged when selling the token
- Often higher than buy tax in legitimate tokens
- Extreme sell taxes can trap funds (soft honeypot)
Transfer Tax
- Fee on wallet-to-wallet transfers
- Can prevent normal token movement
- Often used to trap funds
Dynamic Tax
- Tax rates that change based on conditions
- Can start low and increase dramatically
- Often used in “stealth” scams
Detection Indicators
| Tag | Severity | Description |
|---|
high_buy_tax | High | Buy tax exceeds normal range |
high_sell_tax | High | Sell tax exceeds normal range |
modifiable_tax | Medium | Owner can change tax rates |
hidden_tax | Critical | Undisclosed fees in contract |
tax_can_exceed_threshold | High | Tax can be set extremely high |
Tax Thresholds
| Tax Range | Risk Level | Notes |
|---|
| 0-5% | Low | Standard range for most tokens |
| 5-10% | Medium | Higher but can be legitimate |
| 10-20% | High | Unusual, verify project legitimacy |
| 20%+ | Critical | Likely scam or soft honeypot |
API Example
curl -X GET "https://api.webacy.com/tokens/0x123...?chain=eth" \
-H "x-api-key: YOUR_API_KEY"
{
"overallRisk": 75.0,
"issues": [
{
"tag": "high_sell_tax",
"severity": "high",
"description": "Sell tax of 25% detected"
},
{
"tag": "modifiable_tax",
"severity": "medium",
"description": "Owner can modify tax rates"
}
]
}
Red Flags
- Asymmetric taxes - Low buy tax, high sell tax (soft honeypot)
- Modifiable taxes - Owner can change rates after launch
- Hidden taxes - Fees not mentioned in documentation
- Increasing taxes - Rates go up over time
- Transfer taxes - Unusual for legitimate tokens
- Complex fee structures - Multiple or stacking fees
Tax Manipulation Tactics
Bait and Switch
- Launch with 0% tax to attract buyers
- Increase taxes after significant volume
- Trap existing holders with high sell fees
Stealth Increase
- Gradual tax increases over time
- Each increase seems small
- Cumulative effect traps funds
Conditional Taxes
- Different rates for different wallets
- Insiders exempt from taxes
- Regular users pay full fees
Protection Strategies
- Check current taxes - Verify buy and sell rates before trading
- Review tax modifiability - Can owner change rates?
- Monitor for changes - Watch for tax updates post-purchase
- Read the contract - Look for hidden fee mechanisms
- Start small - Test with small amounts first
- Set slippage carefully - Account for taxes in slippage settings
Calculating Actual Costs
When trading tax tokens:
Actual received = Amount × (1 - buy_tax) × (1 - sell_tax)
Example: 10% buy tax, 15% sell tax
$100 purchase → $90 after buy tax
$90 sell → $76.50 after sell tax
Total loss: $23.50 (23.5%)
