Discounts and Sales Tax: How to Work Out What You Really Pay

Calculating a single discount

To find the amount you save, multiply the original price by the discount percentage and divide by 100. Then subtract that amount from the original price to get the sale price. For a 75 pair of shoes at 20% off, the saving is 75 × 20 ÷ 100 = 15, so the sale price is 60.

A faster method is to multiply by what you will actually pay. At 20% off you pay 80% of the price, so 75 × 0.80 = 60. Both methods give the same answer.

Stacked discounts do not add up

Shops sometimes offer an extra discount on top of a sale price, such as “an extra 10% off sale items”. It is tempting to add the two percentages, but each discount applies to a smaller price. A 100 item at 20% off costs 80. An extra 10% off that is 8, leaving 72. The total discount is 28%, not 30%.

To combine discounts, multiply the parts you pay: 0.80 × 0.90 = 0.72, which means you pay 72% of the original price. The order of the two discounts does not change the final result.

Where sales tax fits in

In places that add sales tax at the till, the tax is normally worked out on the discounted price, not the original. Using the shoes again: 60 after discount, with 8% tax, means tax of 4.80 and a total of 64.80. If the tax were wrongly calculated on the original 75, you would expect to pay 6 in tax and be surprised at the till.

In many countries, prices already include VAT or GST. In that case the shelf price is what you pay, and you should not add tax a second time. The Discount Calculator lets you switch tax on or off for this reason.

Comparing percentage and fixed-amount offers

Sometimes one shop offers a percentage off and another offers a fixed amount. Convert both to a final price before deciding. On a 120 jacket, 25% off gives 90, while “30 off” also gives 90 — they are equal. On a 200 jacket, 25% off gives 150 while 30 off gives 170, so the percentage offer is better. On cheaper items, a fixed amount is often the better deal.

Rounding and receipts

Shops round each money amount to the nearest cent. When tax is applied line by line rather than to the whole basket, a few cents of difference can appear. That is normal and not a mistake on either side.

Common mistakes

Adding discount percentages together. Applying tax before the discount. Adding tax to prices that already include it. Forgetting delivery fees, which are rarely discounted. And trusting a “was” price without checking whether the item was ever actually sold at that price.

To check a deal quickly, enter the original price, discount, and tax rate into the Discount Calculator. If you only know the before and after prices, the Percentage Calculator's change mode tells you the real discount.

A quick checklist before you buy

Write down the original price, the discount, any extra code, the tax rate and the delivery cost. Apply the discounts one after another, then add tax to the discounted price, then add delivery. Compare that final figure with other shops, not the headline percentage. If the total still feels like good value, the deal is real; if not, the banner was doing the work.