In the case of General Railway Signal Company v. Commonwealth of Virginia at the Relation of the State Corporation Commission, 1917, the Supreme Court was asked to decide whether a state could impose a license tax on an out-of-state corporation for conducting business within its borders. The General Railway Signal Company (GRSC), based in New York but operating in Virginia, argued that it should not be subject to such taxation as it did not have any permanent place of business or employees residing in Virginia and all orders were accepted and filled outside state lines. However, GRSC had salesmen who solicited orders within Virginia's boundaries which led to substantial profits from transactions with local railway companies. The court ruled against GRSC stating that while interstate commerce is generally exempt from state taxation under federal law, this does not extend to corporations merely because they engage in interstate trade. It held that states can levy taxes on foreign corporations if those entities maintain representatives within their jurisdiction whose activities result in significant intrastate business operations - even if no physical office space is maintained there.

In the dissenting opinion for General Railway Signal Company v. Commonwealth of Virginia at the Relation of the State Corporation Commission, Justice Holmes argued that a state should have jurisdiction over foreign corporations operating within its boundaries and be able to impose taxes on them. He contended that if a corporation chooses to do business in a state, it must abide by that state's laws and regulations, including taxation. Furthermore, he disagreed with the majority's interpretation of due process rights as they pertain to corporations' interstate commerce activities. In his view, states should not be limited in their ability to regulate and tax businesses simply because those businesses also operate outside their borders.