(dissenting).
I cannot agree with the opinion of the majority. The purchaser of a refrigerator got for his money, not only a refrigerator, but also the seller’s agreement that it would keep the refrigerator in good repair for a period of five years. This was an obligation over and beyond the usual manufacturer’s warranty of its product.
There is an implied warranty on every sale by a manufacturer that the article is free from defects in workmanship and material. Many times these defects can be discovered only from a use of the article, and in the custom of the various trades certain periods of time are allowed for these defects to show up. If they show up within the time allowed, the manufacturer must remedy them at his own expense. If they do not show up within this time, it is presumed the break-down was not occasioned by faulty manufacture, but by something else, in which event the maker is relieved from responsibility.
In the case of automobiles,' for instance, the warranty time is ordinarily 90 days, but in the case of an electric refrigerator the standard time is one year. If the machine becomes defective .after the expiration of one year, the purchaser must make the necessary repair's at his own expense.
This was the rule obtaining in the case of defendant’s refrigerators until the year 1933. If, prior to that time, one of their refrigerators went bad after it had been in use for more than a year, it had to be repaired at the expense of the purchaser. Ordinarily the purchaser had the repair work done by the retail dealer or the distributor, but sometimes it was done by an outside party; but in any event it was done at the purchaser’s expense.
The quality of the repair work thus done and the cost of it was causing an unfavorable reaction toward plaintiff’s machines, and partly for this reason plaintiff decided to.'make available to a *936purchaser its own repair facilities. At first it offered to a purchaser an agreement to keep the machine in repair for one year after the expiration of the warranty period, or for two years, or for three years, as the purchaser might elect; or the purchaser might refuse all of these proffered agreements, and have any necessary repairs made by any person he might choose.
If the purchaser accepted any of the agreements offered by plaintiff, he was required to pay therefor $6.00 per year. If the purchaser took the three-year agreement, it would thus cost him $18.00.
Plaintiff then in 1935 determined it could offer a purchaser a four-year agreement and at the price of $10.00, instead of the former price of $18.00 for three years. This it did. Some purchasers took advantage of it and some did not.
In the following year, 1936, plaintiff concluded that if all of its purchasers of refrigerators took its four-year maintenance agreement, it could further reduce its price to $5.00. Since under previous plans a substantial number of purchasers of refrigerators had not accepted the maintenance agreements, plaintiff, in order to put the $5.00 plan into effect, found it necessary to require that all purchasers of refrigerators enter into the maintenance agreement. So, from then on what had before been optional, now became obligatory; but the price of the agreement was reduced to $5.00. It was thus successively reduced from $18.00 for a three-year agreement to $10.00 for a four-year agreement, and then to $5.00 for a four-year agreement.
From this recitation of facts it would seem apparent that what the plaintiff sold was not only a refrigerator but also an agreement to keep the refrigerator in good condition for four years, in addition to the warranty period of one year.
This was of value to the purchaser and it cost the plaintiff a substantial sum of money to fulfill it. Just how much it had cost purchasers to keep their machines in repair prior to 1933 does not appear, but plaintiff’s agreement must have saved them a considerable sum because 93 percent of the multiple-unit purchasers, who had the option of entering into the agreement or not, entered into it.
The record does show that it cost plaintiff $4,628,797.83 to fulfill its obligation under the agreements. This was an average cost of $65.00 for each unit repaired. That plaintiff was able to enter into an agreement to repair for $5.00, whereas it cost it $65.00, is explained by the relatively small number of machines that needed repair within the contract term. The total amount collected on the agreements was $10,-687,115.00.
It is true that plaintiff made a profit of more than 100 percent on the agreements, but it cannot be said that an agreement which it cost plaintiff $4,628,-797.83 to perform was - not something substantial over and above the sale of the refrigerators. Except for these agreements, plaintiff would not have been required to expend this $4,628,797.83.
Nor can it be said that the purchaser did not receive something of substantial value in addition to the refrigerator when he paid $5.00 for plaintiff’s agreement to do something which might cost it $65.00 to do.
Evidently these agreements were not a subterfuge to increase the price of the refrigerators.
It may be further said that on all sales of refrigerators these repair agreements were invoiced separately, and the amounts received from them and the cost of their performance were entered on plaintiff’s books in an account separate from the account of refrigerator sales.
The cases relied on by defendant are not controlling. In Lash’s Products Company v. United States, 64 Ct.Cl. 252, affirmed 278 U.S. 175, 49 S.Ct. 100, 73 L.Ed. 251, the purchaser secured for his money only the article purchased which in that case was a soft drink. In *937that case the Supreme Court said, “The amount added [to the purchase price] because of the tax is paid to get the goods and for nothing else.” That is not true here. The purchaser got something in addition to a refrigerator. He got an agreement to keep it in repair for four years, in addition to the customary warranty period. If an automobile dealer agrees to keep my car in repair for four years, can it be said that he has sold me nothing but an automobile ?
It is also obvious that the selling and advertising expenses that go into the price of an article are not things the purchaser gets in addition to the product — which was the question involved in Fitch Company v. United States, 323 U.S. 582, 65 S.Ct. 409, 89 L.Ed. 472.
This opinion is in line with rulings of the Internal Revenue Service in comparable cases.
In S.T. 943, 1952—1 C.B. 221, pencils subject to tax “were sold by the manufacturer as a unit” with spring loaded reels or notebooks not subject to tax. The Bureau ruled that the tax attached only to “that portion of the manufacturer’s sales price of the unit which is properly allocable to the taxable article.”
Rev.Rul. 204, 1953 — 20 I.R.B. 25, a retailer of taxable silverware gave to the purchaser a non-taxable article as a sales incentive. It was ruled that the transaction constituted a sale of the silverware and a non-taxable article at a lump sum price, and that the tax should be measured only by the portion of the total amount received that was attributable to the silverware. Clearly the purchaser here had to pay the full amount to get the silverware and could not obtain the non-taxable article separately. But the tax was not imposed upon the full amount paid by the purchaser because for that amount the purchaser received something other than the taxable article.
In Rev.Rul. 224, 1953 — 21 I.R.B. 16, phonograph mechanisms, which are taxable under section 3404(b) of the Internal Revenue Code, were combined with player attachments, which were not tax-, able, and were sold as a unit for a single price. The tax was ruled to apply only to the portion of the price attributable to the mechanism, notwithstanding the mechanism and the attachment were intended to be used together and the particular mechanism could be obtained only through payment of an amount that included the price of the non-taxable attachment.
See also S.T. 572, XI-2 C.B. 469, 1932; and Rev.Rul. 54-100, 1954 — 11 I.R.B. 12.
I am authorized to say that LITTLE-TON, Judge, joins in this dissenting opinion.