...discounted price? I just bought a phone from ATT and noticed that they
calculated the sales tax based on the original price not the discounted price, is this legal?
That's up to State law. A very general rule of thumb is that if you use a STORE coupon you pay the sales tax on the retail price. If you use a manufacturer's coupon you pay the sales tax on the discounted price. Also, when a rebate applies, you always pay the sales tax on the retail price BEFORE the application of the rebate. This is true whether it's a mail-in or "instant" rebate.