NFT royalties: what they are and who pays
An NFT royalty pays a creator each time the NFT is resold. Marketplaces decide whether to honor it, and some made payments optional in 2023.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20264 min readFact-checked
On this page
- Royalties pay creators on resales, not on the first sale.
- Marketplaces decide whether to honor royalties, and some made them optional in 2023.
- Buyers may pay the royalty on top, or sellers may receive less.
- A royalty is separate from a marketplace trading charge.
When you see a royalty listed on an NFT, it is not a tax or a platform fee. It is a term about future resales that the creator sets in the contract or collection.
What is an NFT royalty?
An NFT royalty is a preset share of a resale price that goes to the creator. It rewards ongoing work after the first sale. The royalty is a term attached to the NFT or its collection, not a separate token.
How do NFT royalties work?
The royalty terms are usually written into the smart contract that governs the NFT. A standard called EIP-2981 lets a creator set a royalty that is paid when the NFT is resold, and the contract records ownership on a blockchain.
- The creator sets the royalty when the collection is created.
- The smart contract stores the share and the creator's address.
- When a buyer resells, the marketplace checks the contract for terms.
- If the marketplace honors the royalty, it sends the share to the creator.
Who pays NFT royalties?
The blockchain does not pay the royalty. On a sale, the marketplace can add the royalty on top of the price, so the buyer pays more. Or the marketplace can take it out of the seller's proceeds, so the seller receives less.
The contract says what share is due, but the marketplace decides how to collect it. The buyer may see it as a separate line, and the seller may see it deducted.
What limits NFT royalties?
Creators earn ongoing income only where a marketplace or a contract enforces the royalty. A smart contract can record a royalty, but it cannot force a marketplace to collect it. In 2023, several major marketplaces made royalty payments optional for sellers.
How royalties differ from marketplace charges
An NFT royalty is separate from the initial mint sale and from marketplace trading charges. The mint sale is the first sale, and a marketplace charge is a fee the platform keeps for using its service.
Frequently asked questions
Sometimes. Some contracts let the creator update the royalty, but many lock the terms at mint. Check the collection's contract or settings.
The IRS treats crypto as property, so royalty income is generally taxable. You report the value you receive as income.
The creator stops receiving automatic payments on resales there. Buyers pay only the listed price, and the creator usually has no way to force payment unless another marketplace enforces it.
No. A royalty is not a built-in blockchain feature. It depends on the contract standards and the marketplaces on that chain.
