The case of Inter-Island Steam Navigation Co. v. Territory of Hawaii in 1938 revolved around the issue of whether or not a tax imposed by the Territory of Hawaii on gross income derived from interstate commerce was constitutional, as it potentially violated the Commerce Clause which prohibits states from interfering with interstate commerce. The Inter-Island Steam Navigation Company argued that this tax was unconstitutional because their business involved both intrastate and interstate operations, making it difficult to separate taxable versus non-taxable income accurately. However, the Supreme Court ruled against them stating that if an apportionment method is available to differentiate between intra-state and inter-state incomes then such a tax does not violate constitutionality under Commerce Clause even though some burden may fall upon inter-state commerce indirectly.

In the dissenting opinion for INTER-ISLAND STEAM NAVIGATION CO. v. TERRITORY OF HAWAII, Justice Black argued that the majority's decision to uphold Hawaii's tax on inter-island shipping was inconsistent with previous rulings and violated principles of federalism. He contended that this case should have been treated similarly to other cases where state taxes were struck down because they interfered with interstate commerce or discriminated against out-of-state businesses. The justice believed that allowing Hawaii to impose a tax on inter-island shipping would effectively allow states to regulate and control interstate commerce, which is constitutionally reserved for Congress. Furthermore, he expressed concern about potential negative impacts on national unity if each state could levy its own taxes on goods transported across its borders.