A discount reduces the price of a product or service by a percentage of the original price. When multiple discounts are applied, they are calculated sequentially: the second discount is applied to the already-reduced price, not the original. This means two 20% discounts do not equal a 40% discount.

The formula for a single discount is: Sale Price = Original Price x (1 - Discount%/100). For stacked discounts: Sale Price = Original x (1 - Discount1%/100) x (1 - Discount2%/100). Sales tax is then applied to the final discounted price: After-Tax Price = Sale Price x (1 + Tax%/100).

For example, a $120 item with a 25% discount becomes $90. If an additional 10% coupon is applied, it takes 10% off $90 (not $120), bringing the price to $81. With 8% sales tax, the final cost is $87.48. The total savings is $39 off the original price, an effective discount of 32.5%, not the 35% you might assume from adding 25% and 10%.