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your move was legal as the goblin sac is technically an additional cost the activating Tar Pitcher's ability.

[QUOTE=Blakroc]I was playing EDH and sacked a goblin token to Tar Pitcher to deal my opponent's Master Transmuter lethal damage. He said I should declare the target before I sacrificed the goblin. It seems like Pitcher's text implies that you sac the goblin then deal the damage. What is the ruling about this?[/QUOTE]

You do declare the target before you sacrifice the goblin. However both actions are done during the activation of the ability, which is a point during which your opponent cannot respond. By the time you finish activating the ability, the goblin is sacrificed, and the ability is waiting to resolve to deal the damage to the transmuter.

Why exactly did he ask? It seems to imply that he's trying to abuse a rule system he doesn't fully understand because he's correct you have to announce your target before paying the cost but there is nothing he can gain by this because priority isn't passed.

Basically it's like GoblinsInc said but to describe it in detail it works like this:

We assume you have priority, as long as this doesn't change your opponent isn't allowed to do anything (this includes playing instants).

Before you pay the cost of a spell or ability you must first anounce it (there are very few instances where this rule has any impact but sometimes its relevant), so you announce it, declare targets and then pay the cost. It is only then that priority is passed and your opponent is allowed to act. Your Goblin is sacrificed by the time you pass priority so there is nothing your opponent can do about that. There is just no way he can prevent you from activating Tar Pitcher once you have priority.