If you cap NY sales tax, they most certainly do tax sales tax. Below is a memo I sent to Glen Cove Volvo a few years ago as a sales manager was wondering how sales tax is computed (a few minor details are missing as the dealer already had them)…
Also, if you carefully read some of the examples in Pub 839 posted above, you will discover that they do indeed compute tax on tax. You may also want to check my previous posts regarding NY sales tax.