On June 18, 2025, the Supreme Court of Ohio affirmed a Board of Tax Appeals decision, holding that Aramark Corporation (“Aramark”) was not entitled to a refund of the commercial activity tax (CAT) paid on reimbursements received from its management-fee clients. The case involved situations where Aramark entered into “management-fee” contracts with its customers under which it made purchases of food, beverages, and other materials on their behalf. Clients would reimburse Aramark for the costs incurred plus a management fee. Initially, Aramark paid Ohio CAT on the total amounts received from its clients under these arrangements. Aramark then sought a refund of excess tax paid, arguing that only the management fee was subject to CAT, as the reimbursements for food and beverage costs were excludible from the CAT base. Aramark reasoned that these receipts were not taxable because Aramark received them as an agent for its clients, and such agency receipts are not subject to CAT.
The court determined that Aramark did not meet the definition of an “agent” as provided under Ohio Rev. Code Ann. §5751.01(N)(2), because Aramark “failed to show that it did not hold, have, or keep the reimbursements that it received from its management-fee clients. Indeed, the record lacks any evidence establishing that Aramark passed on to its third-party vendors the reimbursements it received from its management-fee clients. Further, the court reasoned that even if Aramark met the definition of an agent, it did not meet the statutory requirements for the gross receipts exclusion under Ohio Rev. Code Ann. § 5751.01(F)(2)(l). Specifically, the reimbursements were not acquired or received on “behalf of another” as required by the gross receipts exclusion (Ohio Rev. Code Ann. §5751.01(F)(2)(l)). Thus, the reimbursements constituted taxable gross receipts.
A significant implication of the decision is the court’s explicit rejection of the interpretive approach it had previously used in Willoughby Hills Dev. & Distrib., Inc. v. Testa (155 Ohio St.3d 276, 120 N.E.3d 836, (2018)). The court disapproved of its own decision in Willoughby Hills to the extent it required a showing of “actual authority” for a taxpayer to qualify as an agent for CAT purposes, stating that such a requirement imposed an “interpretive gloss” not found in the statutory language. Instead, the court emphasized that the statutory definition of “agent” should be applied as written, without importing additional requirements from prior case law or other tax contexts.
The dissent argued that Aramark met the statutory definition of “agent” and that the reimbursements were received “on behalf of another,” thus qualifying for the exclusion. However, the majority rejected this view, reinforcing that only the General Assembly can prescribe exclusions from gross receipts and that Aramark did not satisfy the statutory criteria.
In summary, the court’s decision clarifies the interpretation of the CAT’s agency exclusion, narrows the circumstances under which taxpayers can claim the exclusion, and signals a departure from the Willoughby Hills precedent by insisting on a plain reading of the statutory text without judicial embellishment.
For more information about the Ohio Supreme Court ruling on the Aramark case, please contact our state and local tax (SALT) team professionals.
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