Does it matter whether I apply a percentage discount before or after VAT?

The numbers

A product at 100 before tax, a tax rate of 15% used here purely as an example (use the rate you enter for your business), and 20% off.

The discount multiplies by 0.80 and the tax multiplies by 1.15, and the order of a multiplication does not change the result. 100 × 0.80 × 1.15 = 100 × 1.15 × 0.80.

Where the order starts to matter

• The tax figure on the document: the tax due here is 12, not 15, because it is charged on the actual selling price after the discount. Show 15 and your figures no longer agree.
• Fixed-amount discounts: 20 off the net price gives 80, then 92 with tax, but 20 off the tax-inclusive price gives 95. Now the total differs.
• Rounding: every rounding at an intermediate step can move the total by a cent.

Doing it with the tools

1. If your store shows tax-inclusive prices, enter that price and the rate in the Discount calculator. You get the discounted total straight away: 115 with 20% off gives 92.
2. To see the tax inside that total, extract it from 92 in the VAT calculator at the rate you enter. At 15% the net is 80 and the tax is 12.
3. If your prices are net of tax, discount first in the discount calculator, then add tax in the VAT calculator. Same result.

What this means for you as a seller

As long as the discount is a percentage, you can apply it to whatever price the customer sees, with or without tax, and the total will be right. Watch two things: the tax on your document must be computed on the discounted price, and if you run a fixed-amount coupon, say whether it comes off before or after tax, because that changes what the customer pays.