Invoices, sales receipts, estimates and credit notes:

To make items on your invoices and sales receipts taxable:

On the product or service line(s) that you'd like to collect sales tax for, click to select the box under the Tax column.
Click to select the appropriate tax from the drop-down Tax menu. You can add a new tax from here as well by clicking Add New.
When you're done with the sales form, click Save, Print, or Send depending on your preference.

How sales tax works on discounts:

If you enter discounts and sales tax on the same sales transaction form, you can control whether sales tax is charged before or after subtracting the discount.

At the bottom of the invoice, sales receipt, refund receipt, or credit note, select:

After Discount to subtract the discount, and then calculate sales tax on the remainder.
Before Discount to calculate sales tax on the Taxable Subtotal, and then subtract the discount.

For example, with the following amounts:

Subtotal = 100.00
Discount = -10.00
Tax % = 8.5%

Choosing After Discount yields a Total of 97.65 (100.00 minus 10.00 = 90.00 times 8.5%).

Choosing Before Discount yields a Total of 98.50 (100.00 times 8.5% minus 10.00).