In the 1936 case of Carmichael, Attorney General of Alabama, et al. v. Southern Coal & Coke Co., the U.S Supreme Court upheld an Alabama law that imposed a tax on businesses using labor within the state. The plaintiff, Southern Coal & Coke Co., argued that this was unconstitutional as it violated their rights under both Due Process and Equal Protection clauses of the Fourteenth Amendment because they were being taxed more heavily than other companies not employing manual laborers in-state. However, the court ruled in favor of Alabama stating that there was no discrimination since all businesses operating within its borders were subject to taxation based on their use of labor and resources regardless if they employed manual workers or not. Furthermore, it held that states have broad authority to levy taxes for revenue purposes without violating constitutional protections against arbitrary classifications.

In the dissenting opinion for Carmichael, Attorney General of Alabama, et al. v. Southern Coal & Coke Co., Justice McReynolds disagreed with the majority's view that a state tax on gross receipts from businesses operating within its borders was constitutional. He argued that this type of taxation could lead to double taxation and potentially violate interstate commerce laws by placing an unfair burden on out-of-state companies doing business in Alabama. Furthermore, he contended that such taxes were not truly apportioned among states based on their respective populations as required by the Constitution but instead disproportionately affected certain industries or companies depending upon where they conducted business operations. This, according to Justice McReynolds, violated principles of fairness and equality under law.