Effective sales tax when cart has taxable and exempt items, and discount applied

Hi @sevans917,

Here you can find a guide about how taxes are calculated with WooCommerce.

As for your specific setup, please provide more information about how you have setup taxes for your particular site, and how you are applying the discount code. Is the discount code coming from a core WooCommerce coupon, or do you have a plugin that adds discount codes to your orders?

Hello @kylemcpheron,

Thanks. The guide makes no mention of what calculation method is used when a discount is applied to a cart that contains both taxable and non-taxable items. It is this formula that I seek to understand. What follows are the settings on this site.

Tax Options:
Prices exclusive of tax.
Calculate tax based on customer shipping address.
Shipping tax class based on cart items.
Rounding–yes, but no effect on my issue.
Additional tax class: Apparel

Standard Rates:
US, PA, 6%
US, OH, 8%

Apparel Rates:
US, PA, 0%
US, OH, 8%

Shipping is Free on all items.

Discount codes are Woo core, not via a 3rd party plugin. Simply $100 off the cart total.

So for an order that ships to PA, where generally apparel is exempt, if the cart contains only apparel, or only general merch, then the tax calculations are as expected. But when the cart is a mix of the two classes, the calculation is mysterious to me. It’s not applying 6% on the discounted total. It’s some percentage of that, and the percentage seems to vary by the proportion of taxable vs exempt items in the cart.

• This reply was modified 4 years, 3 months ago by sevans917.
• This reply was modified 4 years, 3 months ago by sevans917.

Hi @sevans917. Discounts are applied to the product price before tax is calculated as explained here. The discount is not applied to the total but rather distributed amongst all items in the cart proportionally, line by line.

If you have a specific example, we’d be happy to take a closer look.

@drwpcom – thanks, I was eventually able to determine that the distribution of the discount is quantity based. When cart contains 4 of product A @ $50 each and 1 of product B at $100 each, 5 units means 1/5 per unit, or 20%. So if product A is taxable and product B is not, then product A discounted is $50 – 20% = $40 each, x 4 units = $120 upon which a sales tax is applied.

This makes it a nightmare for accounting, especially in my use case. But that’s probably true of any e-commerce platform when using discounts with order that can contain both taxable and exempt products.