In the 1928 case Cudahy Packing Company v. Hinkle, Secretary of State, et al., the U.S. Supreme Court ruled in favor of Cudahy Packing Company, a meatpacking company based in Nebraska that challenged Washington state's business license tax law. The court held that the tax was unconstitutional as it violated both due process and equal protection clauses under the Fourteenth Amendment because it imposed an unfair burden on interstate commerce businesses like Cudahy who had limited physical presence or activities within Washington state but were taxed at rates similar to those with substantial operations there. This ruling set a precedent for future cases involving taxation and interstate commerce by establishing limits on how states could impose taxes on out-of-state companies.

In the dissenting opinion for Cudahy Packing Company v. Hinkle, Justice Holmes argued that Washington state's tax on businesses was not unconstitutional as it did not discriminate against interstate commerce. He believed that the tax was a legitimate exercise of the state's power to raise revenue and should be upheld if it does not create an undue burden on interstate commerce or favor local businesses over out-of-state ones. The majority opinion held that this tax violated the Commerce Clause because it taxed activities occurring outside of Washington State, but Holmes disagreed with this interpretation. He contended that all business operations are interconnected and thus taxing one part inevitably affects others, regardless of where they occur geographically. Therefore, he saw no reason why a state could not impose such a tax as long as it is applied equally to all companies operating within its borders.