Withholding tax calculation doesn't subtract cash discount - Defect or incorrect setup?

Summary:

We have a U.S. withholding tax setup with Calculation Point = Payment and Taxable Basis Formula = STANDARD_TB_DISCOUNT. When paying an invoice which has discount payment terms and is setup for U.S. withholding, the withholding amount calculated at payment is based on the full amount not the discounted amount expected due to the taxable basis formula. Is this a defect or do we have the incorrect setup?

For example:

Invoice Amount = $1,000

Discount based on payment terms of 2/10 Net 20 = $20

Calculated Withheld Amount = -30.70 (1,000 x withholding tax rate 3.07%)

Correct Withheld Amount should be -30.09 (980 x 3.07%)

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