Magento – Magento tax doesnt get calculated based on [subtotal] minus [discount] but just [subtotal]

couponmagento-1.7tax

I've currently setup a coupon code that when entered gives 10% on everything in the shopping cart.

This works fine, my issue though is that Tax is calculated wrong.
Currently tax is calculated purely based on the [subtotal]

If discount is applied I need tax to be calculated based on:
[subtotal] – [discount] = [amount_to_base_tax_calculation_on] * [tax_rate] = Correct tax

Is there any settings / options ive missed to make the checkout page do this?

Best Answer

Solution:

Go to System > Configuration > Sales > Tax "Apply Customer Tax" set to: "After Discount"