# Taxation Features

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A Tax Token can incorporate the following types of taxes:

## **Wallet Taxes**

A Wallet tax can route the project's Token or the Native Token (e.g., ApeCoin) to a specified wallet. Creators can establish <mark style="color:orange;">**up to 6 wallet taxes**</mark>, with a <mark style="color:blue;">**maximum of 3 in the project's Token**</mark> and <mark style="color:orange;">**3 in the Native Token**</mark>, each with adjustable tax rates. This type of tax can serve various purposes, such as:

* Marketing wallet
* Treasury wallet
* Charity wallet
* Transferring tokens to a burn address

## **Add Liquidity**

The Add Liquidity tax operates by swapping <mark style="color:orange;">**half of the collected tax for the Native Token**</mark> and then using both the project's Token and the Native currency to increase the liquidity pool. The Liquidity Provider (LP) tokens obtained from this addition are burned, which helps to stabilize the token’s value.

For more information on how liquidity works, see [<mark style="color:blue;">**Initial Liquidity**</mark>](/token-creation/initial-liquidity.md)

## **Rewards**

Rewards are a tax feature that allows token holders to receive rewards based on their holdings. Before deployment, the creator can specify which reward token will be distributed, either the project's own token or another token (with additional options to be added over time).

Rewards are allocated proportionally according <mark style="color:orange;">**to each user's token balance at the time of distribution.**</mark> For instance, here is an example of a Reflections tax that rewards holders with ETH:

### **Balances:**

* Alice owns 100 tokens
* Bob owns 200 tokens

### **Distribution:**

* 1500 ApeCoin is distributed among holders
* Alice receives 1500 x (100 / 300) = 500 ApeCoin
* Bob receives 1500 x (200 / 300) = 1000 ApeCoin

To learn more about the mathematics behind reward distribution, [<mark style="color:green;">**click here**</mark>](https://batog.info/papers/scalable-reward-distribution.pdf).

## **Buyback Whale**

The Buyback Whale tax collects Native Tokens within the contract. The creator can then execute a buyback and burn through the <mark style="color:blue;">**Ape Express**</mark> website, which supports increasing the token’s price and decreasing the total supply.


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