# Taxes and Discounts: order of operations question

Derek Atkins warlord@MIT.EDU
15 Jun 2002 15:07:29 -0400

```It may depend on the government (or the discount).  I certanly don't
know the rules for all the various countries out there (I barely
understand the rules in the US!)  It also may depend on the type of
discount.  For example, a discount coupon for "\$5 off" is most likely
taken after tax.  I think in the end it's best to allow all the
options and let the user choose the computation method.  Flexibility
is good :)

-derek

Kevin Benton <KevinB@webex.com> writes:

> I could be off-base here, but isn't it true that the governmental agencies
> only care that we pay taxes on what the customer actually paid for the
> product or service before tax?  Maybe I'm oversimplifying something.
>
> Kevin Benton
>
> WebEx Communications, Inc. accepts no liability in relation to any personal
> emails, or any content of any email that does not relate directly to the
> business of WebEx Communications, Inc.
>
>
> -----Original Message-----
> From: Derek Atkins [mailto:warlord@MIT.EDU]
> Sent: Friday, June 14, 2002 9:41 PM
> To: gnucash-devel@gnucash.org
> Subject: Re: Taxes and Discounts: order of operations question
>
>
> More on the problem.  I said:
>
> > In one way, you always compute the discount off the pretax number, and
> > compute the taxes off of either the pretax value or "pretax-discount"
> > value.  In the other way, you either compute the tax on
> > "pretax-discount", or you compute the discount on "pretax+taxes".
>
> I'm not convinced I got all the cases right.  I actually think there
> are three (well, four, but two are equivalent) cases:
>
> In two cases, you always compute the discount off the pretax number
> and compute the tax off of either "pretax" or "pretax-discount".  In
> the other cases you always compute the tax off the pretax number, and
> compute the discount off of either "pretax" or "pretax+taxes".  As you
> can see, computing both tax and discount off of the pretax (the first
> choice of both options) is the same.  But there are still three ways
> to make this computation:
>
>         tax             discount
> 1)      pretax          pretax
> 2)      pretax-discount pretax
> 3)      pretax          pretax+taxes
>
> (I don't think there is any way to compute the tax off pretax-discount
> and discount off of pretax+taxes at the same time).  Is it reasonable
> to provide all three options?  If not, what are the reasons?  If so,
> how should they be named?
>
> -derek
>
> --
>        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>        Member, MIT Student Information Processing Board  (SIPB)
>        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
>        warlord@MIT.EDU                        PGP key available
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--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board  (SIPB)
URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
warlord@MIT.EDU                        PGP key available

```