How can discounts be applied?

To briefly review the discounts issue:

The term "Sales Price" is defined by state law (in every state) and is set by the Seller, not the tax processor. Once the Sales Price is set by the seller, the tax amount due can be calculated. States have no tax definition for "Discounts" or rules on how to get the sales tax amount due on a negative Sales Price.

Because each item may taxable or exempt, when a discount is applied, the methodology of exactly how that discount is applied is a relevant business decision for the Seller.

For example, does the Seller apply the discount:

  1. Evenly (DiscountDollars divided by AllItemsCount[easiest]or
  2. Proportionally (LineItemSalesPrice divided by AllItemsSalesPrice multiplied DiscountDollars), or
  3. Sequentially (reducing the LineItemSalesPrice of an item down to zero, if additional DiscountDollarsremain, continue through each additional line item until DiscountDollars is exhausted), or
  4. Preferentially (exempt items before the taxable items, or vice-versa)

Whichever methodology is employed should be documented by the Seller, and implemented by the selling platform (or if already implemented by the platforms, the methodology should be a disclosed Discount Application Policy).

Finally, after any discount has been applied, and the revised Sales Price has been determined, a new tax Lookup should be performed.

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