Ohio Sales-Tax Refund Appeals: BTA Must Make Clear ADP/True-Object Findings and Separately Evaluate Invoiced Ancillary Services

1. Introduction

CheckFree Servs. Corp. v. Harris arises from a sales-tax refund claim covering July 2011 through June 2015. CheckFree Services Corporation (“CheckFree”) had collected and remitted Ohio sales tax on amounts it billed customers (primarily financial institutions) for technology-enabled financial-services products. It later sought refunds on the theory that the services were not taxable under Ohio’s sales-tax statutes governing “automatic data processing” (“ADP”).

The Board of Tax Appeals (“BTA”) vacated the Tax Commissioner’s denial and remanded to the Commissioner for further proceedings. On appeal, CheckFree challenged (1) the handling of disbursement authorization (which it argued is nontaxable), and (2) the remand for evaluating ancillary services (arguing they should be treated as part of an integrated, nontaxable whole).

The Supreme Court of Ohio did not decide the ultimate taxability of the disbursement-authorization service or the ancillary services. Instead, it articulated procedural and analytical requirements that must be satisfied before meaningful judicial review—and correct statutory application—can occur.

2. Summary of the Opinion

The court held that the BTA’s analysis of the disbursement-authorization service was too unclear to permit appellate review. It therefore vacated the BTA’s decision in part and remanded with instructions that the BTA:

• Clarify its statutory analysis of disbursement authorization under R.C. 5739.01(B)(3)(e), including whether the service constitutes ADP, whether Marc Glassman, Inc. v. Levin, 2008-Ohio-3819 informs that analysis, whether CheckFree’s data-processing functions are distinct from “movement of funds” functions, and the statutory basis for its conclusion.
• Determine the “true object” of each separately invoiced ancillary service supporting debit authorization and disbursement authorization (i.e., a charge-by-charge analysis).
• Expedite the matter given the age of the tax periods.

The court left intact the BTA’s conclusion that CheckFree’s debit-authorization service is nontaxable (because the Tax Commissioner did not challenge that determination).

3. Analysis

3.1 Precedents Cited (and How They Shape the Decision)

A. The “true object” framework and ADP sequencing

• Cincinnati Fed. S. & L. Co. v. McClain, 2022-Ohio-725: The court reaffirmed that R.C. 5739.01(B)(3)(e) taxes a transaction only when the consumer’s “true object” is the receipt of ADP (rather than personal/professional services to which ADP is incidental). This case is the opinion’s main interpretive anchor for the “true object” test and for distinguishing computer-performed work from human services.
• Marc Glassman, Inc. v. Levin, 2008-Ohio-3819: Used as a model for analytical sequence. The Supreme Court emphasized that in Marc Glassman it began (and ended) by determining whether the service met the statutory definition of the taxed category (there, EIS). If the service does not meet the definition (here, ADP under R.C. 5739.01(Y)(1)(a)), the analysis should stop without resorting to personal/professional-services inquiry. This precedent drives the remand instruction that the BTA must first decide whether disbursement authorization is ADP.

B. Charge-by-charge evaluation of separately stated services

• Cincinnati Fed., 2022-Ohio-725: The court relied on its prior insistence that where the record permits, the tribunal must conduct a “more refined analysis” of separately stated charges and may not treat a bundle as “all-or-nothing.” This directly supports the holding that ancillary services must be independently evaluated under the true-object test when separately invoiced and when the record could support different tax outcomes.

C. The court’s role as reviewer, not initial fact-finder

• Adams v. Harris, 2024-Ohio-4640 and Rover Pipeline, L.L.C. v. Harris, 2025-Ohio-2806: Cited for the standards of review: the “reasonable and lawful” test under R.C. 5717.04, with de novo review for legal issues and deference on witness credibility and evidentiary weighing. This frames why the Supreme Court refused to decide ancillary taxability itself.
• Moody v. NetChoice, L.L.C., 603 U.S. 707 (2024) and Cutter v. Wilkinson, 544 U.S. 709 (2005): Invoked for the principle that an appellate tribunal is a “court of review, not of first view,” reinforcing that the Supreme Court will not substitute itself for the BTA in the first instance.
• EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 2005-Ohio-3096: Quoted (via Rover Pipeline) to stress that the Supreme Court is not a “super [board]” conducting de novo factfinding.
• Sizemore v. Smith, 6 Ohio St.3d 330 (1983): Used to explain that justice is best served with lower-tribunal consideration and full adversarial briefing—one reason the court declined to decide ancillary-service taxability where the Tax Commissioner did not brief the merits of those specific charges.

D. Necessity of clear administrative findings for appellate review

• McDonald v. United Air Lines, Inc., 745 F.2d 1081 (7th Cir. 1984), Gechter v. Davidson, 116 F.3d 1454 (Fed. Cir. 1997), and H&R Block Tax Servs., L.L.C. v. Acevedo-Lopez, 742 F.3d 1074 (8th Cir. 2014): Cited to support the administrative-law proposition that an adjudicative body must make findings and provide reasoning sufficient for “meaningful appellate scrutiny.” These authorities underpin the court’s decision to vacate and remand due to the BTA’s opacity.

E. Statutory construction and careful attention to text

• Stingray Pressure Pumping, L.L.C. v. Harris, 2023-Ohio-2598: Cited for the principle that tax statutes receive a “fair reading” of what the legislature enacted.
• Aramark Corp. v. Harris, 2025-Ohio-2114: Quoted for the admonition that statutory refund disputes require careful attention to “the meaning of the relevant statutory language.” This becomes an explicit directive on remand.
• Seaton Corp. v. Testa, 2018-Ohio-4911: Cited as general background on Ohio sales tax applying to “retail sales” under R.C. 5739.02.

3.2 Legal Reasoning

A. The new procedural/analytical rule: clarity and correct sequencing under R.C. 5739.01(B)(3)(e)

The opinion’s most concrete “precedential” contribution is methodological. The court held that the BTA’s discussion of disbursement authorization was so “terse and hard to parse” that it was impossible to tell what the BTA actually decided, and impossible to assess whether the BTA correctly applied R.C. 5739.01(B)(3)(e).

This sequencing requirement matters because the BTA appeared to deny “personal or professional services” status based on automation (human involvement), without first clearly stating whether the service qualified as ADP at all. The Supreme Court indicated that such an approach risks inverting the statute: the “true object” test applies to transactions where ADP/EIS is being provided; it is not a free-standing “automation means taxability” concept.

B. Independent evaluation of ancillary services under the true-object test

On CheckFree’s second proposition of law, the court confirmed that separately invoiced ancillary services cannot automatically inherit the tax status of a core service. Where the record supports differentiated outcomes, the BTA must determine the “true object” of each separately stated component.

The opinion also grounded this charge-by-charge approach in the Tax Commissioner’s own rule: Adm.Code 5703-9-46(B)(4), which contemplates transactions with separable components having different true objects (ADP vs personal/professional services).

At the same time, the court rejected a rigid “disaggregation” that would ignore integration. It explained that the true-object test itself addresses integration: if an ancillary charge’s true object is merely the provision of the same exempt service, it will receive the same treatment; only ancillary items with a different true object may be taxed differently.

C. Institutional roles on remand: the BTA must do the work

The court agreed with CheckFree that the BTA should not have remanded the ancillary-service analysis to the Tax Commissioner. Because the record was “well-developed,” the BTA—like in Cincinnati Fed.—should perform the refined analysis itself. But the Supreme Court refused CheckFree’s request that it decide the taxability of the ancillary services directly, emphasizing appellate limits under R.C. 5717.04 and the lack of merits briefing by the Tax Commissioner on those specific charges.

3.3 Impact

A. Administrative adjudication: “meaningful review” demands explicit findings

The opinion strengthens expectations for BTA decision-writing in complex tax-refund cases: where statutory category definitions and the true-object test control, the BTA must state (i) what it is deciding, (ii) which statutory definitions it is applying, and (iii) why the facts satisfy (or do not satisfy) those definitions. Vague statements about “similarities” and “automation” will not survive.

B. Substantive tax analysis: ADP identification comes first

The court’s sequencing guidance is likely to influence future disputes involving technology-enabled services. Parties should expect that:

• Litigation will focus early on whether a service meets the statutory definition of ADP under R.C. 5739.01(Y)(1)(a).
• Arguments about “performed by people” (personal/professional services) will be framed as secondary and conditional.

C. Bundled services and invoicing practices: separately stated charges invite refined review

The reaffirmed “refined analysis” principle means taxpayers and the state will scrutinize invoicing granularity. Where taxpayers separately itemize ancillary features, the BTA may be compelled to evaluate each line item’s true object. Conversely, taxpayers seeking exemption for integrated solutions will need evidence showing that each ancillary item’s true object is the same as (or incidental/supplemental to) an exempt core service.

D. Practical effect: delays discouraged, but not at the expense of analysis

The court’s instruction to “expedite” underscores concern about decade-old refund periods. Still, the opinion signals that speed cannot substitute for statutory clarity; the BTA must create a reviewable record and rationale.

4. Complex Concepts Simplified

• ADP (Automatic Data Processing): broadly, processing someone else’s data or providing access to computer equipment to process data (R.C. 5739.01(Y)(1)(a)). Not everything done with computers is automatically ADP for tax purposes; the statutory definition controls.
• True-object test: asks what the customer is really buying. If the customer’s real aim is to obtain ADP, the transaction may be taxable. If the real aim is a personal or professional service and the computer work is only incidental, it may be nontaxable.
• Personal or professional services: “services performed by people” in the sense discussed in Cincinnati Fed. S. & L. Co. v. McClain, 2022-Ohio-725, and enumerated non-exclusively in R.C. 5739.01(Y)(2). The key takeaway from this opinion is that you do not reach this question unless you first have a clear ADP determination under the statute.
• Separately invoiced ancillary services: support services billed as distinct line items. Under Cincinnati Fed. and this case, such items may require their own true-object analysis because some line items may be ADP while others may be non-ADP services (or vice versa).
• Vacated in part and remanded: the Supreme Court erased part of the BTA’s decision and sent the case back for a new, clearer decision using the proper statutory framework.

5. Conclusion

CheckFree Servs. Corp. v. Harris is a decision about getting the analysis right—and getting it on the record. The Supreme Court of Ohio required the BTA to (1) make an intelligible, reviewable determination of whether CheckFree’s disbursement-authorization service constitutes ADP under the statutory definition and how R.C. 5739.01(B)(3)(e) applies, and (2) conduct a true-object, charge-by-charge assessment of separately invoiced ancillary services.

The broader significance is twofold: tribunals must follow the statutory sequence (ADP first, then true object/personal-service concepts), and parties should expect that separately stated charges in technology-enabled service arrangements will be independently evaluated rather than automatically swept into an “integrated service” label.