An invoice total is a sequence, and the order matters. Quantity multiplied by rate gives the subtotal. Any discount comes off that subtotal. Tax is then charged on the discounted figure, because tax is due on what is actually being paid, not on a price nobody was charged. Shipping is added last, and whether it is itself taxable depends on the jurisdiction.
Tax rates and names differ everywhere — VAT across Europe, GST in India, Australia, Canada and Singapore, sales tax that varies by city in the United States — so the rate is an input rather than a hard-coded figure. The same applies to whether shipping is taxed, which is why it sits outside the taxed subtotal here; add it into the line items if your rules tax it.
On the defaults, 24 units at $185.00 gives a subtotal of $4,440.00. A 5% discount brings it to $4,218.00, 20% tax adds $843.60, and the invoice total is $5,061.60.
The formula
qty- Units or hours billed
rate- Price per unit or hourly rate
discount- Reduction applied before tax
tax- VAT, GST or sales tax rate
How to use this calculator
- Enter the quantity of units or hours being billed.
- Enter the rate per unit or per hour.
- Enter any discount percentage agreed with the client.
- Set the tax rate and shipping; the gauge shows the grand total.
Worked examples
24 units at $185.00
24 × $185.00 = $4,440.00. Less 5% gives $4,218.00. Tax at 20% adds $843.60, for a total of $5,061.60. The client pays $5,061.60; $4,218.00 is yours and $843.60 is collected on behalf of the tax authority.
Taxing before the discount instead
Charging 20% on the undiscounted $4,440.00 would add $888.00 — $44.40 more than is actually due. The discount must come off first, because tax is charged on the consideration received.
How to read your score
Frequently asked questions
Is tax charged before or after a discount?
After. Tax applies to the amount actually payable, so a discount reduces the tax as well as the price. Charging tax on the pre-discount figure over-collects and creates a reconciliation problem later.
Is shipping taxable?
It depends on the jurisdiction and sometimes on how the charge is worded. Several US states tax delivery when it is not separately stated; VAT generally follows the treatment of the goods. Shipping sits outside the taxed subtotal here so you can decide.
What tax rate should I use?
Whichever applies where the supply takes place, which for cross-border digital services is often the customer's country rather than yours. The rate is an input because it varies by country and, in the United States, by city.
Should I invoice in the client's currency?
It is a courtesy that costs you the exchange risk. If you do, state the rate and date used on the invoice so the conversion can be checked, and consider a small buffer in the rate.
What payment terms are normal?
Thirty days is the common default in business-to-business work, though fourteen days is increasingly usual for smaller suppliers. State the terms and any late-payment interest explicitly on the invoice, since in several jurisdictions statutory interest applies whether or not you mention it.
Invoice reference
| Quantity | Subtotal | After 5% discount | Tax | Total |
|---|---|---|---|---|
| 4 | $740.00 | $703.00 | $140.60 | $843.60 |
| 12 | $2,220.00 | $2,109.00 | $421.80 | $2,530.80 |
| 24 | $4,440.00 | $4,218.00 | $843.60 | $5,061.60 |
| 48 | $8,880.00 | $8,436.00 | $1,687.20 | $10,123.20 |
| 100 | $18,500.00 | $17,575.00 | $3,515.00 | $21,090.00 |
Tax is applied to the discounted subtotal, as it should be on a compliant invoice.