Given:
Pre-tax amount: 2,075
Tax is 18.5%
Discount on Pre-tax amount: 15%
We should first compute for the discount before the tax.
2,075 * 15% = 311.25
2,075 - 311.25 = 1763.75
Tax paid based on discounted pre-tax amount
1,763.75 * 18.5% = 326.29
1,763.75 + 326.29 = 2,090.04
Total discount : 311.25
Total tax : 326.29
Total amt. paid: 2,090.04
Mr. Ferguson's calculation is incorrect because both rates have different bases. The base of the discount is the pretax amount, while the base of the tax rate is the pretax amount, net of the discount.
Each rate should be applied individually to the amount, not deducted from each other with the difference applied to one base amount.