The U.S. Supreme Court case McFarland v. American Sugar Refining Company in 1915 revolved around the issue of taxation and interstate commerce. The state of Louisiana, represented by Supervisor of Public Accounts McFarland, sought to impose a tax on the American Sugar Refining Company for sugar produced within its borders but sold outside the state. The company argued that this was an unconstitutional interference with interstate commerce as per Article I, Section 8 of the Constitution which grants Congress exclusive power over such matters. In its decision, the Supreme Court sided with American Sugar Refining Company stating that while states have broad powers to levy taxes for revenue purposes, they cannot use these powers to regulate or burden interstate commerce indirectly through taxation measures aimed at goods destined for out-of-state markets. This ruling reinforced federal supremacy in regulating interstate trade and limited states' ability to interfere with it via their taxing authority.

In the dissenting opinion for McFarland v. American Sugar Refining Company, Justice Holmes disagreed with the majority's interpretation of Louisiana law and its application to this case. He argued that the state had a right to tax property within its jurisdiction, including stocks owned by corporations domiciled in other states but held in Louisiana. He contended that such taxation did not violate due process or equal protection clauses of the Fourteenth Amendment as it was neither arbitrary nor discriminatory. Furthermore, he asserted that there was no legal basis for exempting out-of-state corporations from taxes on their locally-held assets simply because they were incorporated elsewhere. In his view, allowing such an exemption would undermine state sovereignty and create unfair advantages for foreign corporations over local businesses.