How a discount is calculated
Savings = price × discount % ÷ 100
Sale price = price × (1 − discount % ÷ 100)
A 25% discount on 79.99 saves 79.99 × 0.25 = 20.00 (19.9975 rounded), so you pay 79.99 × 0.75 = 59.99.
Stacked discounts are not added together
"20% off, plus an extra 10% at the checkout" sounds like 30% off, but the second discount is taken from the already reduced price:
Total discount = 1 − (1 − 0.20) × (1 − 0.10) = 1 − 0.80 × 0.90 = 0.28 → 28%
The order does not matter (10% then 20% also gives 28%), but the combined discount is always a little less than the sum.
Adding sales tax or VAT
In the US, sales tax is usually added at the till; in most other countries, VAT or GST is already included in the shelf price. If tax is added on top, apply it to the discounted price: 59.99 + 8% = 59.99 × 1.08 = 64.79. Coupons and discounts generally reduce the taxable amount, although specific rules vary by state and country.
Finding the original price
If an item costs 45 after 25% off, the original price is not 45 + 25%. Divide by what you paid as a fraction: 45 ÷ (1 − 0.25) = 45 ÷ 0.75 = 60. This is useful for checking whether a "was" price is realistic.
Quick discount table
| Discount | You pay | On 50 | On 100 | On 250 |
|---|---|---|---|---|
| 10% | 90% | 45 | 90 | 225 |
| 15% | 85% | 42.50 | 85 | 212.50 |
| 20% | 80% | 40 | 80 | 200 |
| 25% | 75% | 37.50 | 75 | 187.50 |
| 30% | 70% | 35 | 70 | 175 |
| 40% | 60% | 30 | 60 | 150 |
| 50% | 50% | 25 | 50 | 125 |
| 70% | 30% | 15 | 30 | 75 |
Is it really a good deal?
- Compare the final price, not the percentage. 30% off an inflated "was" price can still cost more than another shop's normal price.
- Check unit prices (per kg, per litre, per item) for multipacks and "buy 2 get 1 free" offers: buy 2 get 1 free is a 33% discount per item, but only if you need three.
- Include delivery and tax when comparing online and in-store prices.
Common mistakes
- Adding stacked discounts (20% + 10% is 28%, not 30%).
- Undoing a discount by adding the same percentage (60 − 25% = 45, but 45 + 25% = 56.25).
- Applying tax before the discount when it should be calculated on the reduced price.
Percentage off versus amount off
A fixed amount off is worth more on cheaper items, and a percentage off is worth more on expensive ones. "10 off" beats "15% off" on anything under 66.67, because 15% of 66.67 is 10. When a shop offers a choice, compare both at your actual basket total.
Multi-buy offers as a percentage
| Offer | Effective discount per item |
|---|---|
| Buy one, get one free | 50% (if you want two) |
| Buy two, get one free | 33.3% (if you want three) |
| 3 for the price of 2 | 33.3% |
| Second item half price | 25% across two items |
Markup versus margin (for sellers)
If you buy an item for 60 and sell it for 100, the markup is 40 ÷ 60 = 66.7% of the cost, while the margin is 40 ÷ 100 = 40% of the price. A 40% discount on that price would remove the whole margin. Sellers should check that the discount still leaves a profit after fees and shipping.
Extracting VAT or GST from a price
When tax is already included, divide by (1 + tax rate) to find the price before tax: a price of 120 including 20% VAT is 120 ÷ 1.20 = 100 before tax, so the VAT is 20, not 24.
Frequently asked questions
How do I calculate a discount?
Multiply the price by the discount percentage and divide by 100 to get the savings; subtract it from the price. 25% off 79.99 is 59.99.
Is 20% off plus 10% off the same as 30% off?
No. The second discount applies to the reduced price, so the total is 1 − 0.8 × 0.9 = 28%.
How do I find the original price before a discount?
Divide the sale price by (1 − discount). A price of 45 after 25% off was originally 45 ÷ 0.75 = 60.
Is sales tax calculated before or after a discount?
Usually after: tax is charged on the discounted price, though rules for manufacturer coupons can differ by location.
Is buy one get one free a 50% discount?
Per item, yes, but only if you wanted two. If you only needed one, you paid the full price.
What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. Buying at 60 and selling at 100 is a 66.7% markup but a 40% margin.
How do I remove VAT from a price?
Divide the price by 1 plus the VAT rate. 120 including 20% VAT is 100 before VAT.
Sources
- Federal Trade Commission (US), Guides Against Deceptive Pricing, 16 CFR Part 233 (former-price comparisons).
- European Commission, Price Indication Directive 98/6/EC as amended by Directive (EU) 2019/2161 (announcing price reductions).
Last reviewed 5 October 2026. Results are estimates; see our disclaimer.