The U.S. Supreme Court case American Railway Express Company v. Kentucky in 1926 dealt with the issue of interstate commerce and state taxation rights. The American Railway Express Company, a New York-based company, was taxed by the state of Kentucky for property that was temporarily located within its borders as part of its nationwide transportation business operations. The company argued this tax violated the Commerce Clause of the Constitution which prohibits states from interfering with interstate commerce. However, the Supreme Court ruled against them stating that while states cannot impose taxes on activities solely because they are part of interstate commerce, they can tax property within their jurisdiction even if it is used for such purposes so long as it does not create multiple taxation or discriminate against out-of-state businesses.

In the dissenting opinion for American Railway Express Company v. Kentucky, Justice Oliver Wendell Holmes Jr., joined by Justices Louis Brandeis and Harlan Fiske Stone, argued that the majority's decision was a departure from established principles of constitutional law. They contended that it is not within the purview of courts to question whether a tax is reasonable or justifiable based on its amount but rather if it violates any specific prohibition in the Constitution. The dissenters believed that there was no such violation in this case as they saw no reason why states cannot impose taxes on interstate commerce businesses operating within their borders, provided these taxes are non-discriminatory and do not create direct burdens on interstate commerce itself. They also disagreed with the majority's view about what constitutes an undue burden on interstate commerce, arguing instead for a more nuanced understanding which takes into account various factors including how much business an entity does locally versus across state lines.