Currently, the API only supports requests for sales tax based on an amount - not a discount - so the discount is either:

• applied BEFORE the call to TaxCloud

• credited back to the Customer AFTER the call to TaxCloud via a Customer Credit Note.

Adding negative line items on Sales Orders and/or Customer Invoices to manage discounts and/or credits will not result in the correct calculations as these lines will be ignored.

Note:  "Sales Price" is a term that is defined by state law (in every US state) and you should be aware of these definitions.  States have no tax definition for "Discounts".  The situation you have to be sure you understand is if you honor manufacturer or distributor discounts for which you will be reimbursed (like a grocery coupon).  In these cases, you are normally required to charge Sales Tax on the pre-discounted price.  Odoo can be customized to support manufacturer/distributor discounts for which you will be reimbursed.  For regular discounts that are given by you, as the seller, Odoo works as you would expect.

First, enable discounts in Sales Settings:

Then just add a discount to either the Sales Order or Invoice (or both) and the Tax is calculated on the discounted price.

Modified Sales Order Report (to show the tax amount per line):

Modified Invoice Report (to show the tax amount per line):

Note: if you don't want to do it this way, then you use a Customer Credit to apply the discount AFTER you have recorded the full Invoice (sending it to TaxCloud during validation).  This 'unreports' the revenue and 'unreports' the tax based on the Credit - you then apply the Credit to reduce the balance of the Invoice. 

The Customer pays the same in the end - no matter which method you choose.