Overview
Some states, including New York, require taxes to be calculated on the original item price, even when discounts are applied at checkout. Treez supports this requirement by ensuring that discounts do not reduce the taxable amount, while still applying discounts correctly to the final total.
How To Configure Taxes Before Discounts
Navigate to Configuration → Config Page → Taxes
Select Discount & Tax Calculation
Select Calculate Taxes Before Discounts
When this setting is enabled:
All configured taxes (state, local, compounding, etc.) are calculated on the original item prices before discounts
Discounts do not reduce the tax basis
What This Means for Discounts
All discount types continue to apply to the order as expected, including:
Automatic and manual discounts
Reward discounts and loyalty redemptions
Round down at checkout
Tier pricing
However, these discounts will not lower the taxable amount.
Promotion & Pricing Consideration
When taxes are calculated on original (pre-discount) prices, promotions with very deep discounts may result in a final total higher than the advertised discounted price, especially for stores that use post-tax pricing.
This typically occurs when the discount percentage exceeds the effective tax rate. In these cases, the discount reduces the item price, but taxes are still calculated on the original price, which can lead to customer confusion if the promotion is advertised as a final “out-the-door” price.
How Taxes and Discounts Work Together
Example order
Item price: $100.00
Discounts applied: $20.00
Total taxes (state + local): 8%
Result
Taxes are calculated on $100.00
Total taxes = $8.00
Discounts reduce the total, but do not reduce taxes
Final total
$100.00 − $20.00 discounts + $8.00 taxes = $88.00
What to Notice
The tax amount stays the same, even with discounts
Discounts still reduce what the customer pays
Reporting
With this tax setting enabled, the Tax Report will display an additional column in the report overview labeled Gross Sales (Incl. Returns).
Gross Sales (Incl. Returns) represents the original product prices before discounts and includes returns.
The Taxable Amount includes this amount plus any compounding tax (if configured), and represents the final tax basis used to calculate taxes.
