In the 1917 case of City of Covington v. South Covington & Cincinnati Street Railway Company, the U.S Supreme Court ruled in favor of the railway company. The city had attempted to impose a tax on the company's gross receipts, but this was challenged as being unconstitutional under Kentucky law which prohibited taxes on property outside its jurisdiction. The court found that since some of these receipts were derived from interstate commerce and operations conducted beyond city limits, they could not be subjected to local taxation by the City of Covington. This decision upheld principles regarding limitations on local taxation powers over interstate commerce and extraterritorial assets or activities.

In the dissenting opinion for the case of City of Covington v. South Covington & Cincinnati Street Railway Company, it was argued that the majority's decision to uphold a city ordinance requiring street railway companies to pave and maintain areas surrounding their tracks was an unfair imposition on private entities. The dissenting justices contended that such maintenance should be considered a public duty, not one relegated solely to private corporations operating within city limits. They further asserted that this ruling could set a dangerous precedent by allowing municipalities to shift financial burdens onto businesses under the guise of regulatory ordinances. This, they feared, would discourage future business development and investment in infrastructure projects due its potential for unforeseen costs imposed by local governments.