This Tax Calculation configuration option is also available on the global level.
You can control whether you want to calculate taxes before or after discounts are applied at the storefront checkout and when creating orders from the back-office:
- Navigate to System > User Management > Organizations in the main menu.
- For the necessary organization, hover over the More Options menu to the right of the necessary organization and click to start editing the configuration.
- Select Commerce > Taxation in the menu to the left.
For faster navigation between the configuration menu sections, use Quick Search.
- You can enable or disable the Calculate Taxes After Promotions option. Select the check box if you wish to have your taxes calculated on the reduced price after the discounts are applied. If this option is disabled, taxes are calculated based on the full price before the discounts are applied.
When a discount applies to the entire order, it is proportionally distributed among all line items and subtracted from the subtotal of each of them. Tax is calculated for each taxable line item after that.
- Line item 1 subtotal = 1000$
- Line item 2 subtotal = 100$
- Total discount amount = 10$
- Tax = 10%
Discount distribution among all line items:
- Line item 1 discount amount = (1000 * 10) / (1000 + 100) = 9.09$
- Line item 2 discount amount = (100 * 10) / (1000 + 100) = 0.91$
Taxes for line items:
- Taxable Line item 1 tax: (1000$ - 9.09$) * 0.1 = 99.091$
- Taxable Line item 2 tax: (100$ - 0.91$) * 0.1 = 9.909$
- Total tax amount after discounts: 99.091$ + 9.909$ = 109$
- Click Save Settings.