In the case of Gully, State Tax Collector, et al. v. Interstate Natural Gas Co., 1933, the U.S Supreme Court ruled on a dispute involving federal jurisdiction and state taxation powers. The Interstate Natural Gas Company (INGC), incorporated in Delaware but operating in Mississippi, was assessed by Mississippi's tax collector for unpaid taxes based on its capital stock value. INGC argued that since it derived much of its income from interstate commerce and federal land leases - both areas under exclusive federal control - the state had no right to levy such a tax; thus making this a matter of federal concern. However, the court disagreed with INGC’s argument stating that just because an activity has some connection to something within exclusive Federal control does not automatically make it an issue for Federal courts. It held that while certain aspects of INGC's business were federally regulated or connected to government property did not mean all activities fell under those categories as well; therefore states could still exercise their power over local matters like taxation without infringing upon Federal authority. The ruling affirmed states' rights to impose taxes on businesses operating within their borders even if they are involved in interstate commerce or dealing with federally controlled resources.

In the dissenting opinion for Gully v. Interstate Natural Gas Co., Justice Stone argued that the majority's decision to dismiss the case on jurisdictional grounds was incorrect. He contended that federal courts should have jurisdiction over cases involving state tax laws when those laws are alleged to infringe upon rights or privileges protected by federal law, as in this instance where a Mississippi tax statute allegedly violated provisions of the Federal Constitution and statutes regulating interstate commerce. In his view, such allegations present a substantial federal question which warrants review by a federal court. Furthermore, he disagreed with the majority's interpretation of "arising under" clause in Section 24 of Judicial Code (28 U.S.C.A §41(1)), asserting it should be interpreted broadly enough to include cases like this one where there is an assertion of federally protected rights against state action.