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I am stumped at how to work out the tax for an invoice, when discounts are applied to invoices that have multiple line items with multiple tax rates? See my example invoice below:

SomeItemOne(Tax: 20%) - Cost:£2.45 | Qty:1 (Line Sub Total: £2.45) 
SomeItemTwo(Tax: 20%) - Cost:£22.45 | Qty:5 (Line Sub Total: £112.25) 
SomeItemThree(Tax: 10%) - Cost:£68.99 | Qty:4 (Line Sub Total: £275.96) 
SomeItemFour (Tax: 0%) - Cost:£68.99 | Qty:4 (Line Sub Total: £275.96)

This would give me an invoice breakdown of:

Subtotal: £666.62
Tax (20% of 114.70): £22.94
Tax (10% of 275.96): £27.60
Tax (0% of 275.96): £0
Total: £717.16

I now need to offer a 50% discount on this invoice. How is this calculated with multiple tax rates?

I can't just take 50% off the Subtotal? As I won't be able to correctly calculate the different tax rates?

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Apply the discount before you apply the tax (unless your specific tax jurisdiction calls for the tax to be applied to the pre-discount value - NOTE that this would not be normal in the USA/EU). Then calculate the tax normally on the now-discounted pricing.

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    Note that mathematically, if you applied the discount to the subtotal and the taxes individually, you would end up with the same result as using this method, you'd just have a lot more work to do :p
    – corsiKa
    Commented Oct 10, 2018 at 16:48
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    I would normally agree, but this method also eliminates potential rounding errors in the case that the tax is applied in an itemized manner instead of to the final subtotal (such as $0.013 due in tax, which is either $0.01 or $0.02 depending on the tax code).
    – GOATNine
    Commented Oct 10, 2018 at 17:48

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