This case was a dispute between the state of California and the Central Pacific Railroad Company. The state of California argued that the company had failed to pay taxes on certain lands that it had acquired from the federal government. The company argued that it was exempt from paying taxes on these lands because it had been granted them by the federal government. The Supreme Court ultimately sided with the state of California, ruling that the company was not exempt from paying taxes on the lands in question. The Court held that the company was subject to the same taxation laws as any other private entity, and that the federal government had no authority to exempt it from taxation. The Court also held that the company was liable for any taxes that had accrued since the date of its acquisition of the lands. This ruling established that the federal government could not grant special exemptions from taxation to private entities.

In California v. Central Pacific Railroad Company, the Supreme Court was asked to decide whether a state could tax property owned by a railroad company that operated in multiple states. The majority opinion held that the state of California did not have authority to impose taxes on this interstate railroad company's property because it would interfere with Congress' power over interstate commerce and violate the Constitution’s Commerce Clause. Justice Field dissented from this decision, arguing that while Congress had exclusive control over regulating interstate commerce, it did not have exclusive control over taxing such activity; rather, he argued that each state should be able to exercise its own taxation powers within its borders without interference from other states or federal government. He further noted that if one state were allowed to tax an entire business operating across several states then all of those states would be subjecting themselves to potential double taxation and unequal treatment under different laws which could lead to economic chaos and confusion for businesses operating in more than one jurisdiction.