Ohio Commercial Activity Tax has an exclusion from gross receipts for property or money received or acquired as an agent in excess of the agent’s commission fee or other reimbursement. R.C. 5751.02(F)(2)(l). Aramark Corp., the taxpayer in this case, contracted with educational, healthcare, and government institutions to provide food service operations. See Aramark Corp. v. Harris, Ohio BTA Case No. 2019-2975. Aramark would purchase food and labor and incur other costs in connection with its services. Aramark’s customers would reimburse Aramark for the costs incurred and pay a management fee on top of the reimbursements. Aramark asserted that it should only be taxed on its management fee, since the reimbursements qualified for the agent exclusion. The Tax Commissioner argued that Aramark did not qualify as an agent under the statute, and the BTA agreed.

Provisions in Aramark’s contracts disclaiming any agency relationship were fatal to its arguments it was acting as its customer’s agent when purchasing food and other supplies. The agent exclusion requires the agent to have the actual authority to bind the principal. The BTA found that Aramark did not have the requisite authority because the agreements expressly disclaimed any agency relationship between Aramark and its customers. It further held that the reimbursements it received were part of costs of goods sold which are not deducted from gross receipts for CAT purposes.

This case highlights that the right contract provisions are critical for claiming the agency exclusion.