Like with most things (at least in my experience) it's all in your approach. I choose to be friendly and courteous, patient and persistent.
I simply ask them to waive the upgrade fee, if they say no, I kindly remind them that I'm an easy customer that never calls in threatening to leave or causing them headaches. I go on to say I would really appreciate them waiving the fee and they then say yes.
So to the OP, you should expect to pay the price for the phone, plus tax on the full price, not the discounted price. It's a law they must tax you on the retail price of the phone.
Where they make their money is in accessories which is an opportunity for you to allow them to make their sales pitch, and say no thank you. All their accessories are overpriced compared to buying online.
Hope this answers your questions.