In the case of Lehigh Valley Railroad Company v. Pennsylvania, 1891, the U.S Supreme Court ruled in favor of Pennsylvania. The state had imposed a tax on freight transported both within and across its borders by railroads incorporated under its laws. Lehigh Valley Railroad Company challenged this tax as unconstitutional, arguing that it interfered with interstate commerce and violated the Commerce Clause of the Constitution which grants Congress exclusive power to regulate trade between states. However, Justice Gray delivered an opinion stating that while states cannot directly regulate or burden interstate commerce, they can indirectly influence it through legitimate exercises of their taxing powers so long as those taxes do not discriminate against out-of-state entities or transactions. Therefore, since Pennsylvania's tax applied equally to all freight carried by railroads regardless if it was intrastate or interstate transportation; thus did not violate any constitutional provisions.

In the dissenting opinion for Lehigh Valley Railroad Company v. Pennsylvania, it was argued that the state of Pennsylvania had no right to tax interstate commerce or property involved in such commerce. The dissenting justices believed that this power belonged solely to Congress under the Commerce Clause of the U.S Constitution. They contended that a railroad company operating both within and outside of a state should not be subjected to taxation by individual states on its entire capital stock, as this would amount to an interference with interstate commerce. Instead, they suggested that only those portions of a company's operations and assets located within a particular state should be subject to taxation by said state. This view maintained respect for federalism principles while also acknowledging states' rights over their internal affairs.