The International Railway Company v. Davidson case in 1921 revolved around the issue of whether a tax imposed by the State of New York on gross receipts from transportation was constitutional when applied to an international railway company operating between Canada and the United States. The Supreme Court ruled that it was not, as it violated both federal law and treaties with Canada. The court held that such taxation constituted regulation of foreign commerce, which is under exclusive control of Congress according to Article I, Section 8, Clause 3 (the Commerce Clause) of the U.S Constitution. Furthermore, this state-imposed tax also contravened provisions within existing treaties between US and Canada ensuring free transit across their borders without any impositions or restrictions by either party.

In the dissenting opinion for International Railway Company v. Davidson, Justice Holmes argued that the majority's decision to exempt international railway cars from taxation was incorrect. He contended that these vehicles should be considered as part of a company’s property and thus subject to local taxes, regardless of whether they are used in interstate or international commerce. The fact that these cars were temporarily located within New York State when not in use made them liable for taxation under state law, according to Holmes' interpretation of precedent cases such as Union Refrigerator Transit Co v Lynch and Pullman's Palace Car Co v Pennsylvania. In his view, the court had overstepped its boundaries by interfering with states’ rights to tax properties within their jurisdiction based on an overly broad reading of what constitutes interference with foreign commerce.