Discounts are not available to be used on Gift Card Activations/Charges by default. You need to turn on the Gift Card Discount setting first.
In order to turn this on:
- Go to Setup -> Order Entry -> Discounts
- Select desired Discount and turn on the Gift Card Discount option.
NOTE: In order to Discount the Gift Card you must have the Discount selected under the check like the picture below. Once it's selected you can then press the discount button that has the Discount Gift Card Option on.