In the case of Deganay v. Lederer, Collector of Internal Revenue in 1918, the U.S Supreme Court was tasked with determining whether a tax assessment on distilled spirits stored in bonded warehouses during World War I was constitutional. The plaintiff, Deganay, argued that the additional taxes imposed by Congress were unconstitutional as they violated his property rights without due process and amounted to double taxation. However, the court ruled against him stating that Congress had broad powers to levy taxes for public purposes under Article I Section 8 of the Constitution and this power extended to levying excise taxes on goods held in bond. Furthermore, it stated that there is no constitutional prohibition against double taxation. Therefore, it upheld both assessments as valid exercises of Congressional taxing authority.

In the dissenting opinion for Deganay v. Lederer, it was argued that the tax imposed on imported perfumes used in manufacturing should not be considered a direct tax but rather an excise or duty. The dissenting justices believed that this interpretation aligned with historical precedent and constitutional intent regarding taxation powers of Congress. They contended that classifying such taxes as direct would unduly restrict federal revenue-raising capabilities and potentially disrupt economic activity by discouraging importation of necessary goods for domestic production. Furthermore, they disagreed with majority's view about "mixed" nature of these taxes, arguing instead for a more straightforward classification based on their functional characteristics rather than formalistic labels or categories.