Tax hiccup – tax rate inflated when none taxed/none discounted items in cart

Our setup is the following.

We have two categories of products, retail products and services. We are running a promotion on retail products with tiered discount rules applied in the cart. These discount rules do not apply to services.

All is good and functioning correctly with that configuration.

Tax information.

Retail products are taxed at the store location tax rate. Services however, are set to none taxed.

The issue is that when products from both the discounted and non-discounted categories are added to the cart, the rate rate increases.

However, the subtotal is correct.

e.g.
$300 of retail products added to cart. 7.1% tax rate
-$90: 30% discount on retail products if subtotal is $300 or more.
= $210 subtotal for retail products.

Without any services in the cart taxes come out to be $210*.071= $14.91. All good.
https://ibb.co/QNW7Pzg

Now let’s add a $750 none taxed service to the cart. Again all good.
https://ibb.co/qWBMY0g

However together, we get some tax silliness.
https://ibb.co/X23P3MG

You’ll see that taxes are now $16.51 instead of $14.91. The applied tax rate makes no sense on any calculation.
e.g.
Tax on pre-discounted retail products: $300*.071= $21.30
Maybe a tax just on the discount?: $90*.071= $6.39

We have no shipping rates setup. Shipping rates are disabled on the store.

We’ve gone through and tweaked every setting under the sun but cannot get rid of this hiccup.

Ever come across this issue?