This case was a dispute between the Chicago, Burlington, and Kansas City Railroad (CB&KC) and the state of Kansas. The CB&KC had been granted a charter by the state of Kansas in 1872, which allowed them to construct a railroad line through the state. However, in 1887, the state passed a law that imposed a tax on the CB&KC's gross receipts from the operation of its railroad. The CB&KC argued that the tax was unconstitutional, as it violated the Contract Clause of the United States Constitution. The Supreme Court agreed with the CB&KC, ruling that the tax was unconstitutional and that the state of Kansas had violated the Contract Clause. The Court held that the state had interfered with the CB&KC's contractual rights by imposing the tax, and that the tax was an unconstitutional burden on interstate commerce. The Court also held that the tax was not a valid exercise of the state's police power, as it was not necessary to protect the public health, safety, or welfare. As a result, the Court struck down the tax as unconstitutional.

In Chicago, Burlington, and Kansas City Railroad v. Guffey, the Supreme Court was tasked with determining whether a state law that imposed taxes on railroad companies for their gross earnings violated the Commerce Clause of the United States Constitution. The majority opinion held that it did not violate this clause because it only taxed intrastate commerce and thus fell within a state’s power to regulate its own internal affairs. However, Justice Field dissented from this decision arguing that such taxation could have an effect on interstate commerce since railroads often operated in multiple states at once. He argued that if each state were allowed to impose taxes like these then they would be able to indirectly tax interstate commerce by taxing all of a company's operations regardless of which states those operations took place in. Thus he concluded that such laws should be struck down as unconstitutional under the Commerce Clause as they are essentially attempting to regulate something outside of their jurisdiction - namely interstate trade between different states or countries.