How Sales Tax Is Calculated on a Purchase With a Discount
In most jurisdictions, sales tax is calculated on the discounted price, not the original price — the discount is applied first, and tax is then calculated on that reduced amount, which results in a lower total tax than if tax had been calculated on the original price before the discount.
This order of operations is easy to get backward when calculating a total by hand, and it makes a real, calculable difference to the final price.
A worked example
An $80 item with a 20% discount and 7% sales tax: discount first brings the price to $64, then 7% tax on $64 adds $4.48, for a final total of $68.48. Calculating tax on the original $80 first (incorrectly, in most jurisdictions) would add $5.60 in tax before the discount, producing a different and generally incorrect final total.
Why this is the standard order in most places
Sales tax is generally meant to apply to what was actually paid for an item, not its pre-discount list price — since a discount reduces the actual transaction amount, taxing the post-discount price reflects the real value exchanged. This is the standard approach in most US states, though it's worth confirming for any specific, unusual situation.
An exception worth knowing about: manufacturer coupons
Some jurisdictions treat a manufacturer's coupon (reimbursed to the retailer by the manufacturer) differently from a retailer's own discount, sometimes taxing the pre-coupon price rather than the discounted one — this is a genuine, if less common, exception to the general rule worth being aware of for anyone tracking exact receipt totals.