Tax Determination- A doubt

For a material costing $120 gross price, discount is $20, thus net price is $100.
Now for some some states tax is calculated on the net price i.e. $100 , and for some some states it is on gross i.e 120$. How would this configuration be done.

We can use two tax codes to pick different tax percentage value, but how do we configure on what base price the tax percent is applied i.e. on net or on gross.