Make a coupon so that a certain product is free including the tax

Question

I have created a shopping cart rule in Magento so that I can sell coupon codes and have the product free including shipping. I did this, If an item is FOUND in the cart with ALL of these conditions true: Category is 65 Quantity in cart is 1 Row total in cart is 22.99 Then I did a fixed amount discount of 22.99 under actions, but it still charges tax on the item. Any idea how to not charge tax to a item that is now free? I don't want customers to get the whole cart free just this item with their coupon.

Answer 1

It's a setting in the tax configuration rather than the coupon configuration.

System -> Configuration -> Sales -> Tax -> Calculation Settings

You need to make sure the tax is applied after the discount has been made. Note that it is actually a legal requirement to set it up like this in some countries, for example in the UK you will get a rap on the knuckles from HMRC if you are making a tax calculation on an amount which is subsequently discounted.