You’ve probably heard of the dispute between Douglas Kendyson, founder of Nigerian creator-commerce platform Selar, and the Lagos State Internal Revenue Service (LIRS). But maybe you’re unsure of the legal basis—and implications—of the dispute. This analysis answers that.
In July 2026, Douglas publicly accused LIRS, via his social media accounts, of demanding a backdated 5% “royalty” charge on every sale ever processed through the platform. He addressed an open letter to the Lagos State Governor and the Minister of Art, Culture, Tourism and the Creative Economy, arguing that Selar earns a transaction commission for software and payment infrastructure but neither owns nor licenses the intellectual property its 400,000 creators sell through it.
With this argument, Douglas claims Selar’s commission fee does not fall within the scope of “royalty” in literal terms and by definition under the Nigerian tax laws.
Why Selar?
The first question is why is LIRS seeking this “royalty” tax from Selar, and not another company. Well, the reason is not far-fetched. Selar is not a small platform experimenting at the margins. By its own disclosures, it paid out roughly ₦18 billion to creators across Nigeria and thirteen other African countries in 2025 alone.
Also, Selar sits exactly where many two-sided platforms across Africa's creator and gig economies sit: it never owns what moves through it, but it controls the rail the money travels on. Tax authorities worldwide have increasingly leaned on platforms as convenient withholding agents, precisely because a handful of platforms are easier to audit than thousands of individual creators.
So when a founder says a state tax authority wants to reclassify the platform's core revenue as royalty income, the question is not academic. It touches every creator whose course, ebook, or template is sold through the platform, and every fee they will eventually be asked to absorb if the reclassification stands. And every similar platform which is yet to generate enough revenue to get the attention of the tax authority.
As of this writing, LIRS has issued no public statement. The dispute exists only through Kendyson's account. That makes our analysis provisional, built on one side's public record. But the legal question underneath it is significant, and it deserves to be tested properly rather than assumed.
What Does the Law Say?
The Nigeria Tax Act (NTA) 2025, which took effect on 1 January 2026, gave Nigeria its first general statutory definition of "royalty" income. Section 6 defines it as payment for the right to use intellectual property software, trademarks, or licensed content. Read carefully, the provision is triggered by the grant of a right to use IP not by the mere presence of IP-protected goods somewhere in a transaction.
A facilitation commission is a different thing entirely. It is compensation for a service performed processing a sale, running payment infrastructure, and settling funds to a creator's account. Selar's commission does not change based on whether the underlying product is copyrighted or not; it depends only on the value of the transaction passing through the platform. Selar never takes title to what it sells. It never licenses anything. It behaves, in every functional sense, like an agent facilitating a principal's transaction and the law has long held that an agent's commission is not, absent clear statutory language, recharacterised as the agent's own disposition of the principal's property.
There is less ambiguity in Section 6 than the public dispute suggests. Its plain meaning does not obviously stretch to cover Selar's commission. What is genuinely unsettled is not the text, but LIRS's silence on why it believes Selar should be treated as an exception to that ordinary rule. Unfortunately, no published guidance from LIRS, the Nigeria Revenue Service (NRS), or their predecessor FIRS addresses this question for comparison.
Platforms like Paystack, Flutterwave, or Interswitch-type processors have not, to public knowledge, been assessed on this basis. This means Selar cannot point to settled practice in its favour. And LIRS cannot point to precedent for its own position either. This is genuinely an open ground.
Two Ways LIRS Could Be Reading the Law
There are two materially different theories LIRS might be pursuing, and LIRS itself has not clarified which one it is.
The first is a straightforward royalty characterisation. If LIRS treats Selar's commission as payment connected to the use or exploitation of creators' IP, it would fall within Section 6 and attract withholding-type treatment. The second is where LIRS wants Selar, as the party settling funds to individual creators, to withhold tax at source on those payouts under the Deduction of Tax at Source (Withholding) Regulations 2024 and the Personal Income Tax Act, which LIRS administers for Lagos residents.
These theories carry very different consequences, and conflating them is part of what makes the public dispute hard to evaluate. Selar characterises its income as a software-and-infrastructure commission; it takes no proprietary interest in the intellectual property changing hands. Kendyson frames the tax as one that would, in practice, land on creators rather than Selar, since the platform would need to raise fees to absorb a 5% levy.
Most importantly, underneath these two theories is a subtle jurisdictional issue. If the 5% is being assessed against Selar's own commission income, that is ordinarily a matter of company income tax, which is within the federal NRS jurisdiction, not something a state revenue service has the power to assess.
What Tax Law is Missing
Nigeria's tax architecture splits company income tax from personal income tax and certain withholding obligations. LIRS's own published mandate is consistent with Personal Income Tax and state-level withholding. But not Company Income Tax.
If LIRS is assessing Selar's own commission revenue, which would ordinarily form part of the company's taxable profit, that sits outside the state tax authority’s legal remit, however the charge is labelled. If instead LIRS asserts that Selar must withhold on payouts to Lagos-resident creators, that claim sits more plausibly within its withholding function of administering Personal Income Tax. Though the “royalty” characterisation of those payouts will need to be reconsidered.
In the meantime, the LIRS has not clarified which theory is in play, and that ambiguity suggests either an early-stage, informally communicated position, or genuine uncertainty within the tax office.
Lessons for Founders
Even if the analysis favours Selar, resolving the case in Selar's favour will not settle the underlying question for the sector. Whatever happens to Selar's dispute, other platforms with similar marketplace or SaaS-with-payout models should expect this pattern to recur.
More broadly, this dispute is a design constraint, not a one-off headline. Platforms commissioning sales of copyrighted digital goods courses, ebooks, software, templates should document, in plain contractual language, the distinction between their facilitation fee and the underlying IP transaction, before an assessment forces the question. Payout flows to individual creators should be mapped against existing withholding obligations now, not after a notice arrives. And founders should be able to say for every revenue stream they run whether it is federal or state business, because that fact is what determines who even has the standing to ask.
What Selar is testing is not just one platform's tax bill. It is whether Nigeria's new tax law, still finding its edges, will treat a commission as what it actually is or as something broader than the law presently defines.
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Contributors:
Maryam Umar
Hassan Habibat
Abdulmuhmeen Olawoyin