On November 6, 2023, the Ohio Board of Tax Appeals (“the Board”) affirmed the Ohio Tax Commissioner’s denial of Aramark’s $907,532 refund claim for Commercial Activity Tax (“CAT”) paid from July 1, 2012, through December 31, 2016. Under its “management fee” contracts, Aramark’s clients kept receipts, reimbursed Aramark for costs, and paid a management fee. Aramark argued it received the reimbursements “as an agent,” so they should fall outside CAT gross receipts. The Board rejected the agency claim, reasoning that the exclusion turns on actual authority to bind the principal. After reviewing sample agreements, including those involving Nationwide Insurance and the Hilliard City School District, the Board found independent-contractor language and no authority to bind clients to purchase food, labor, or other direct costs. The Board also treated the reimbursements as gross receipts because CAT applies on a gross basis, and excluding them would operate like a cost deduction.
On June 18, 2025, the Ohio Supreme Court affirmed the decision, but on different grounds. The Court held that Aramark did not meet the statutory definition of “agent” in R.C. 5751.01(N)(2), which covers a person “retaining only a commission” while proceeds are remitted to another person, because it did not show that it passed the reimbursements on to its vendors. For the same reason, Aramark did not receive the reimbursements “on behalf of another.” The Court also held the reimbursements were gross receipts, which cover amounts realized from performing services for another. Chief Justice Kennedy, joined by Justice Hawkins, dissented. (Aramark Corporation v. Patricia Harris, Tax Commissioner of Ohio, Supreme Court of Ohio, Slip Opinion No. 2025-Ohio-2114, Case No. 2023-1540, June 18, 2025; Board of Tax Appeals Case No. 2019-2975, November 6, 2023)