On June 18, 2025, in a 5-2 decision, the Ohio Supreme Court held that reimbursements received by Aramark under “management-fee” contracts were not excluded from “gross receipts” as amounts received or acquired by an agent in excess of a commission, fee, or other remuneration.
Aramark is a food services, hospitality, facility services, and uniform services company. It provides a broad range of managed services to businesses and educational, healthcare, and government institutions. Some of Aramark’s services were provided pursuant to a “management fee” agreement where customers purchased food, supplies, and other items. Even though Aramark purchases these items, its customers reimburse Aramark for the expenses. Aramark sought to exclude the gross receipts associated with these purchased items.
Under Ohio’s CAT, there is an exclusion from “gross receipts” for “[p]roperty, money, and other amounts received or acquired by an agent on behalf of another in excess of the agent’s commission, fee, or other remuneration.” Ohio Rev. Code § 5751.01(F)(2)(1). The code defines an agent as “a person retaining only a commission from a transaction with the other proceeds from the transaction being remitted to another person.’” Ohio Rev. Code § 5751.01(P)(2).
The majority explained that Aramark did not meet the definition of an “agent” because Aramark failed to show that it did not hold or keep the reimbursements that it received from its management-fee clients. Instead, the Court observed, nothing in the record showed that Aramark passed on to its third-party vendors the reimbursements it received from its management-fee clients. The Court also determined that Aramark did not receive the reimbursements on behalf of third parties. Rather, Aramark acquired the reimbursements for itself.
The majority also rejected Aramark’s argument that, based on Willoughby Hills Dev. & Distribution, Inc. v Testa, 2018-Ohio-4488, Aramark was an “agent.” The Court in Willoughby Hills interpreted the term “agent” for CAT purposes, relying on another decision, Cincinnati Golf Mgt., Inc. v. Testa, 2012-Ohio-2846. Cincinnatti Golf Mgt.was a use tax case where the Ohio Supreme Court held that, an agent could claim a principal’s tax exemption, even though the agent may not itself be exempt, if the agent had actual authority to act on the principal’s behalf. The Ohio Supreme Court in Willoughby Hills relied on that reasoning, determining that for purposes of the CAT, a person is “authorized” to act on behalf of another when that person has actual authority to do so. The Aramark Court found that the reliance on Cincinnatti Golf Mgt. in Willoughby Hills was misplaced. Instead, the Court observed, because the CAT defines “agent” (whereas the use tax does not), any interpretation of that term should be restricted to the statutory language. Accordingly, the Court noted that, for CAT purposes application of the agency exclusion should be focused on the meaning of the statutory language.
The Court further rejected Aramark’s claim that administrative guidance supported its position. The administrative guidance Aramark relied on established that a “conduit” for payments could exclude the money it receives as a conduit. Here, however, the Court determined that Aramark was not acting as a conduit. Aramark was found to incur expenses on behalf of its management-fee clients and then receive a reimbursement from them.
Finally, the Court rejected Aramark’s argument that the reimbursements did not contribute to the production of gross income. The Court determined that Aramark received the reimbursements in exchange for performing services for others and, therefore, the reimbursements contributed to the production of gross income.
This case illustrates the need to carefully evaluate whether taxpayers fall under one of the enumerated exclusions under the Ohio CAT. Although as a matter of economic logic, receipts may fall under one of those exclusions, taxpayers should examine whether those economics are also aligned with the relevant statutory language.
Aramark Corp. v. Harris, Slip Op. No. 2025-OHIO-2114.