On September 16, 2026, the Ohio Supreme Court (Court) unanimously held in CheckFree Services Corporation v. Harris, Tax Commissioner, Slip Opinion No. 2026-Ohio-3555, that the Ohio Board of Tax Appeals (BTA) applied an incorrect analytical framework in determining whether certain financial services technology transactions were subject to Ohio sales tax as automatic data processing (ADP) under R.C. 5739.01(B)(3)(e). The Court vacated the BTA's decision in part and remanded the case with instructions for evaluating whether CheckFree's disbursement-authorization services constitute taxable ADP services.

Background

CheckFree Services Corporation (Taxpayer) provides electronic financial-services products to financial institutions and merchants. Taxpayer offered two core services: (1) debit-authorization services, which enable debit-card users to withdraw cash from ATMs and make purchases from merchants; and (2) disbursement-authorization services, which enable consumers to make electronic payments to service providers and other billers.

Each core service was supported by a suite of separately invoiced ancillary services, including fraud detection and financial risk-management services, enrollment services, per-user fees, and other related offerings. During the applicable tax period, July 2011 through June 2015, Taxpayer collected and remitted Ohio sales tax on the services it provided to customers. Taxpayer subsequently filed a refund claim with the Ohio Department of Taxation (Department), contending all its services were nontaxable. The Department denied the claim and Taxpayer appealed to the BTA.

The BTA vacated the Department's final determination and remanded the case, issuing three significant rulings. First, applying the Court's decision in Marc Glassman, Inc. v. Levin, 2008-Ohio-3819, the BTA held that Taxpayer's debit-authorization service was analogous to a pharmacy's insurance-coverage-inquiry service, which the Court in Glassman had found nontaxable.¹

Second, the BTA's brief analysis of the disbursement-authorization service acknowledged similarities to the debit authorization service, suggesting that it likewise might be nontaxable. At the same time, however, the BTA concluded that the service was not a "personal or professional service" performed by people and remanded the issue for further consideration. As a result, neither the parties nor the Court could determine the precise basis for the BTA's ruling.

Finally, relying on Cincinnati Federal Savings & Loan Co. v. McClain, 2022-Ohio-725, the BTA rejected Taxpayer's "all-or-nothing" approach to ancillary services. Because the Department's final determination predated Cincinnati Federal, the BTA remanded the ancillary-services issue for a charge-by-charge analysis of the separately invoiced services.

Court's ruling

The Court held that the BTA's one-paragraph analysis of the disbursement-authorization service was internally inconsistent and did not constitute meaningful judicial review. The Court observed the BTA suggested that the disbursement-authorization service should receive similar tax treatment as the debit-authorization service. However, the Court found the BTA failed to explain its reasoning for determining that the disbursement-authorization service was not a nontaxable "personal or professional service" and whether Marc Glassman applied to that service. Additionally, the Court found the BTA failed to explain why any differences between the two services warranted different results. Accordingly, the Court vacated and remanded this portion of the decision for further analysis of whether the service constituted taxable data processing. If the BTA determines that the disbursement-authorization service does not constitute data processing, the service would not be taxable as an ADP/data-processing service. Conversely, if the service qualifies as data processing, the BTA must evaluate each separately invoiced ancillary service under a true-object analysis. The Court further directed the BTA to address whether Marc Glassman applies to the disbursement-authorization service and to clarify whether Taxpayer's data-processing and disbursement functions should be treated as a single integrated offering or as separate services for sales tax purposes.

Turning to the separately invoiced ancillary services, the Court held that the BTA must apply the true-object test to each service individually, rather than extending the tax treatment of the core service to all related charges. The Court emphasized this result is compelled by Cincinnati Fed., in which it rejected an "all-or-nothing" approach and required a charge-by-charge analysis where the record reasonably indicated that some services may be taxable and others may not. The Court rejected Taxpayer's argument that the charge-by-charge rule does not apply when separately invoiced items are components of a "single integrated service." According to the Court, a separately invoiced ancillary service receives the same tax treatment as the core service if both share the same true object. Different tax treatment is appropriate only when a separately invoiced ancillary service has a different true object from the core service. The Court therefore remanded the issue to the BTA to conduct the required true-object analysis for each separately invoiced ancillary service

Implications

The decision establishes a two-step framework for determining whether a service is taxable as data processing. The threshold question is whether the service meets the statutory definition of data processing. If it does not, the analysis ends because the service is not taxable as data processing. If the service does meet that definition, the true object test applies to determine whether the consumer's primary purpose is to obtain computer-based processing or to obtain personal or professional services performed by humans, with any computer processing merely incidental to those services.

The decision also confirms that separately invoiced components of a bundled service cannot be lumped together for sales-tax purposes when the record supports the possibility that some components may be taxable and others may not. Taxpayers and practitioners may want to consider reviewing invoicing structures for bundled financial technology services to evaluate whether true-object analyses are performed on a service-by-service basis for all separately stated charges. Refund claims should address each separately invoiced service individually and be supported by evidence demonstrating the true object of each service. In addition, taxpayers may want to consider reviewing contract and billing arrangements to determine if they accurately reflect the nature and function of each service.