I believe your vendor is correct. Sales tax is generally paid on the GROSS Sales amount. In your example, that would be $1000 times 5.75% or $57.50. If they charged you on the Net Sales amount ($980 times 5.75%) then they would be on the hook to pay the sales tax difference of $1.15 ($57.50 – 56.35). While this might not sound like a lot of money, if you multiply it times the # of customers that they have it can add up. I don’t know any business that would be willing to “eat” the sales tax on top of giving the customer a discount.
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