In the 1890 case of Lawrence Manufacturing Company v. Tennessee Manufacturing Company, the U.S. Supreme Court was tasked with determining whether a state could impose taxes on an out-of-state corporation that had property and conducted business within its borders. The Lawrence Manufacturing Co., based in Connecticut, owned cotton mills in Tennessee but claimed it should not be subject to taxation by the latter state as it was incorporated elsewhere. Conversely, Tennessee argued that since Lawrence operated and held property within its jurisdiction, they were liable for tax contributions. The court ruled in favor of Tennessee, establishing a precedent for states' rights to tax foreign corporations operating within their boundaries. It determined that while interstate commerce is protected from undue burdens imposed by individual states under the Commerce Clause of the Constitution; this protection does not extend to shield out-of-state companies from paying taxes where they own property or conduct business operations. This decision affirmed states' authority over economic activities occurring within their jurisdictions and clarified how constitutional protections apply (or don't) regarding interstate commercial entities.

In the dissenting opinion for Lawrence Manufacturing Company v. Tennessee Manufacturing Company, it was argued that the majority's decision to uphold a state law imposing taxes on out-of-state corporations doing business within its borders violated the Commerce Clause of the U.S. Constitution. The dissenting justices believed that such taxation constituted an undue burden on interstate commerce and infringed upon federal authority over this domain, as established by precedent cases like Cooley v. Board of Wardens (1851). They contended that states should not have unilateral power to impose financial burdens on businesses from other states without violating constitutional principles protecting free trade among states. This view held that any tax or regulation affecting interstate commerce must be uniform across all states and enacted by Congress rather than individual state legislatures in order to prevent protectionist policies favoring local industries at the expense of their out-of-state competitors.