# Is tax calculated on the final sale price of an item, or can it be deducted using the difference in two different prices?

Usually this sort of calculation doesn't make a huge difference, but occasionally there is a difference of about 1 cent or so.

Let's say the sales tax is 8%, and the regular price of a taxable item is \$1.69.

So, `1.69 * 0.08 = 0.1352 = 0.14` (rounded) - total tax on this item is \$0.14.

Now let's say this same item was on sale for \$1.29. This is a store promotion, so any sales tax has to be deducted along with the item price.

`1.29 * 0.08 = 0.1032 = 0.10` (rounded) - total tax is now \$0.10. (A 4 cent difference on the total tax).

But, if you do it the other way, which is taxing the difference that is deducted from the regular price, it comes out to be a cent higher.

`1.69 - 1.29 = 0.40` difference between the regular and sale prices.

`0.40 * 0.08 = 0.032 = 0.03` (rounded) - now a 3 cent difference on the total tax.

Some of this is due to rounding, and I get that. But is either one of these methods "correct," or is the taxable amount always rounded "ceiling" (to the next-highest cent)? If that's the case, then you'd get the same answer for both of these calculation methods.

I wouldn't think a 1-cent difference would be a huge deal to tax agencies, but I'm obviously not a financial expert so I wouldn't know.