In the 1940 case Department of Treasury of Indiana et al. v. Ingram-Richardson Manufacturing Co. of Indiana, Inc., the U.S Supreme Court ruled in favor of the State Department of Treasury, upholding a tax imposed on gross income derived from manufacturing and selling goods within state borders by an out-of-state corporation with a factory in Indiana. The court held that this did not violate either due process or interstate commerce clause protections under the Constitution as argued by Ingram-Richardson Manufacturing Company (IRM). IRM had contended that its business was purely interstate commerce because it shipped all products to customers outside Indiana immediately upon completion at its Fort Wayne plant and thus should be exempted from such taxes according to previous rulings like those in Alpha Portland Cement Co v Massachusetts (1934) and International Shoe Co v Washington (1937). However, Justice Felix Frankfurter writing for majority disagreed stating that while these activities were part of one continuous operation they could still be separated into intrastate components subject to local taxation without interfering with federal authority over interstate trade.

The dissenting opinion in the Department of Treasury of Indiana et al. v. Ingram-Richardson Manufacturing Co. case argued that the majority's decision was inconsistent with previous rulings regarding interstate commerce and taxation laws. The dissenters believed that the tax imposed by Indiana on gross receipts from sales made outside its borders, but delivered within it, violated the Commerce Clause as it discriminated against out-of-state businesses and burdened interstate commerce unfairly. They contended that a state cannot impose a tax on transactions completed beyond its jurisdiction simply because goods are destined for delivery within its boundaries; such an act would be tantamount to regulating or taxing activities occurring entirely outside their territory which is unconstitutional under existing precedents.