This collection exists so that the discount code will not apply to sale items.

Here's instructions on how this was set up and the link to the source:

 

SOLUTION: Excluding Discount Codes on Sale Items in Shopify
If you're not using the "Product Type" field for something like filters, there's a little easier way to do this.
  1. Create a collection called "Non-Sale Items"
  2. Assign the condion as "Product Type" and "is not equal to" and "Sale Item"
  3. Remove the collection from all sales channels (no need to show the collection)
  4. When you assign a sale price to a product, assign the product type "Sale Item".
  5. In your coupon, select the "Non-Sale Items" collection as the limiting condition.
And there you have it. Now, products can be placed on sale by assigning the compare at value and the type "Sale Item", and it will be excluded from the list of valid products (because it will not be found in the "Non-Sale Items" collection).
Some stores also run discounts on sale items to clear inventory. This kind of setup can work in reverse as well, simply by creating a "Sale Items" collection and setting the condition to "Product type is equal to Sale Item". Then select that "Sale Items" collection in your coupon, and bam, you have a coupon that only applies to sale items.
Hope this helps (until Shopify decides to create exclusionary conditions).
NOTE: To update your product types en masse, you can:
  1. Export your products
  2. Sort your products by "Variant Compare At Price"
  3. Remove any record that does not have a value in the "Variant Compare At Price" column
  4. Assign "Sale Item" to the "Type" column for all remaining records.
  5. Import your spreadsheet.

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