Bob Carburetor is the new owner of Carburetor Cars. Bob's brother Bill has owned an auto dealership for years, Radiator Cars. Bob decides to adopt all of his brother's accounting methods. At Radiator Cars, when a vehicle is sold, the dealership tries to sell an auto service contract. The amounts received for these contracts are placed into an escrow account. The agreements grant the buyers the right to have parts or components covered by the contract repaired or replaced, whenever the covered parts experience a mechanical difficulty. The dealer will provide the services or will reimburse the car buyer for the reasonable cost of repair or replacement. Normally, the buyer returns the vehicle to the dealer for repair, but this is not required. In either case, the repairs or replacements must be authorized in advance by an administrator hired by Radiator Cars. Fees to the administrator of the contracts are paid out of the escrow account. Is this the proper tax treatment for these service contracts?