In the case of Eureka Pipe Line Company v. Hallanan, State Tax Commissioner, et al., 1921, the U.S Supreme Court was tasked with determining whether a state could tax an interstate business on its entire net income or only that portion derived from within the state. The Eureka Pipe Line Company operated in several states but was taxed by West Virginia on its total net income rather than just what it earned within that state's borders. The company argued this taxation violated both due process and equal protection clauses of the Fourteenth Amendment as well as being contrary to federal law governing interstate commerce. The court ruled in favor of West Virginia stating that while a state cannot tax value arising outside its jurisdiction nor obstruct interstate commerce, it can levy taxes upon businesses operating within its boundaries for revenue generated there even if they also operate elsewhere. This decision upheld states' rights to tax corporations based on their operations inside each respective state.

In the dissenting opinion for Eureka Pipe Line Company v. Hallanan, it was argued that West Virginia's tax on petroleum products transported through pipelines violated the Commerce Clause of the U.S. Constitution. The dissenting justices believed that this tax constituted a burden on interstate commerce and therefore exceeded state authority. They contended that while states have power to levy taxes within their jurisdiction, they cannot use this power in such a way as to interfere with or obstruct interstate commerce - which is under federal control according to the Constitution’s Commerce Clause. In essence, they saw West Virginia's taxation scheme as an unlawful intrusion into an area reserved exclusively for Congress by virtue of its constitutional authority over interstate commerce.