Is tax applied before or after a discount?

After. The discount is deducted first, then tax is applied to the reduced amount.

It depends on your jurisdiction. This calculator adds shipping after tax; if delivery is taxable where you trade, include it in the taxable subtotal instead.

Does this work for VAT as well as sales tax?

The arithmetic is the same for any single-rate tax. Enter your VAT or sales tax percentage as the rate.

Can I use different tax rates on different lines?

Not in this calculator, and not on a single invoice in the generator. Where lines need different rates, split them across separate invoices or check the correct treatment with your accountant.

How do I get this onto an actual invoice?

Open the invoice generator, enter the same subtotal, discount and tax rate, and the totals block calculates identically before you export the PDF.

Calculator

Invoice Tax Calculator

Enter a subtotal, a discount, a tax rate and any shipping charge to see the taxable amount, the tax and the total due. The calculation order is the same one the invoice generator uses.

Calculate invoice tax and total

Subtotal (before tax)

Discount (%)

Tax rate (%)

Shipping (added after tax)

Subtotal1,000.00

Discount-0.00

Taxable amount1,000.00

Tax (20%)200.00

Shipping0.00

Total due1,200.00

Need the invoice itself?

The invoice generator uses this exact calculation and exports a PDF.

Create Invoice

How do you calculate tax on an invoice?

Add the line totals to get the subtotal, deduct any discount, apply the tax rate to what remains, then add shipping. Tax is charged on the discounted amount, not the original subtotal.

Written as a formula: tax = (subtotal − discount) × rate, and total = (subtotal − discount) + tax + shipping. Getting the order wrong overstates the tax whenever a discount is involved, which is the most common arithmetic error on hand-made invoices.

The formula

Subtotal = sum of (quantity × rate) for every line item
Discount amount = subtotal × discount rate, or a fixed figure you set
Taxable amount = subtotal − discount amount
Tax = taxable amount × tax rate
Total due = taxable amount + tax + shipping

Worked example

An invoice has three lines totalling 1,790.00. A 10% trade discount applies, the tax rate is 20%, and pallet delivery costs 85.00.

Step	Calculation	Result
Subtotal	720.00 + 750.00 + 320.00	1,790.00
Discount	1,790.00 × 10%	179.00
Taxable amount	1,790.00 − 179.00	1,611.00
Tax	1,611.00 × 20%	322.20
Shipping	added after tax	85.00
Total due	1,611.00 + 322.20 + 85.00	2,018.20

Things the calculator cannot decide for you

It applies the rate you enter. It does not know which rate is correct for your goods, your customer's location or your registration status, and rules differ between countries and sometimes between product categories in the same country. Shipping is a particular trap: in some jurisdictions delivery charges are taxable and in others they are not, which is why it is kept as a separate line rather than blended into the goods.

If you are unsure which rate applies, confirm it with an accountant or your national tax authority before you send the invoice. Correcting a tax rate afterwards means a credit note and a reissue.

Frequently asked questions

Published 18 September 2026. Last updated 18 September 2026. Written by the Free Invoice Generator team. General invoicing information, not tax or legal advice.

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