Discount first, then tax — that’s the usual (and customer-friendly) order, because tax is charged on what you actually pay. Get the sequence right and the final total is correct to the cent.
The example
$100 list, 20% off, then 8% tax.
| A | B | |
|---|---|---|
| 1 | Step | Amount |
| 2 | List | $100.00 |
| 3 | After 20% off | $80.00 |
| 4 | + 8% tax | $86.40 |
The formula
Discount, then tax the result:
How it works
Two factors applied in the right order:
(1 − discount)takes the price down — 20% off is × 0.80.(1 + tax)then grosses up the discounted amount — tax on what the customer pays.- Chaining them gives the final total in one cell. Show the intermediate discounted price if the receipt needs it.
- Order matters for the tax base: taxing first then discounting changes the tax (and is usually wrong for retail).
When order doesn’t change the total: multiplying by 0.80 and 1.08 commutes mathematically — the total is the same either way. What changes is the tax amount and what’s legally the taxable base. For correct tax reporting, tax the post-discount price.
Try it: interactive demo
Set price, discount, tax.
Variations
Show the tax amount
On the discounted price:
Stacked discounts
Two discounts then tax:
Tax-exempt items
Skip the tax factor:
Pitfalls & errors
Tax the post-discount price. For retail, tax is charged on what the customer actually pays — discount first.
Stacked discounts multiply. 20% then 10% off is ×0.80×0.90 = 28% off, not 30%.
Round once at the end. Rounding the discounted price and again after tax can drift a penny; round the final total.
Practice workbook
Frequently asked questions
How do I apply a discount then tax in Excel?
Does it matter whether I discount or tax first?
How do I stack two discounts?
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