In City of New Orleans v. New Orleans, Mobile & Texas Railroad Company, the Supreme Court of the United States was asked to decide whether the City of New Orleans had the right to impose a tax on the New Orleans, Mobile & Texas Railroad Company. The railroad company argued that the tax was unconstitutional because it violated the Commerce Clause of the United States Constitution. The Supreme Court held that the tax was constitutional because it was imposed on the railroad company's property within the city limits, and not on the company's activities in interstate commerce. The Court reasoned that the tax was a valid exercise of the city's police power, and that it did not interfere with interstate commerce. The Court also noted that the tax was not discriminatory, and that it was imposed on all property within the city limits. The Court concluded that the tax was constitutional, and that the City of New Orleans had the right to impose it on the railroad company. The Court's decision established that a state or local government may impose taxes on property within its jurisdiction, even if the property is used in interstate commerce.

In City of New Orleans v. New Orleans, Mobile & Texas Railroad Company, the Supreme Court was asked to decide whether a city could tax railroad companies for their use of public streets and wharves. The majority opinion held that the city had no authority to impose such taxes on railroads because it would interfere with interstate commerce and violate the Commerce Clause of the Constitution. Justice Field dissented from this decision, arguing that cities should be able to levy taxes on railroads in order to pay for improvements made by those same railroads which benefit both local citizens as well as travelers passing through. He argued that if states were allowed to tax these businesses without limitation then they would have an unfair advantage over other states who did not have such taxing power and thus create an imbalance in interstate commerce. Furthermore, he argued that since Congress has not specifically prohibited taxation by cities upon corporations engaged in interstate commerce there is nothing preventing them from doing so under their police powers granted by state constitutions or statutes.