In the case of California v. Texas, 1977, the U.S Supreme Court was asked to decide on a dispute between two states over which state had jurisdiction to tax a trust fund. The trust in question was created by a Californian resident but administered in Texas. Both states sought to tax the income generated from this trust and thus arose the conflict. The court ruled that both states could impose taxes on their respective shares of interest earned by the trust without violating constitutional principles against double taxation or due process rights. This decision essentially meant that each state's claim for taxing authority over portions of an interstate business operation must be evaluated individually based on its own merits rather than being subjected to any blanket rule prohibiting multiple taxation.

In the dissenting opinion for California v. Texas, it was argued that the majority's decision to allow states to tax their residents on income earned in other states violates both the Due Process and Commerce Clauses of the Constitution. The dissenters believed that a state should not have jurisdiction over income earned outside its borders, as this could lead to double taxation and discourage interstate commerce. They also disagreed with the majority's assertion that a taxpayer's domicile is sufficient connection for a state to impose taxes on out-of-state earnings. Instead, they contended that there must be some direct benefit or protection provided by the taxing state related to those earnings before such taxation can occur constitutionally.