In the 1939 case of McGoldrick v. Felt & Tarrant Manufacturing Co., the U.S Supreme Court ruled in favor of New York City's Comptroller, Joseph D. McGoldrick, upholding a city tax on goods manufactured outside but sold within its jurisdiction. The defendant, Felt & Tarrant Manufacturing Co., was an Illinois-based company that produced calculating machines and had challenged this tax as unconstitutional interference with interstate commerce. However, the court held that once goods have reached their destination state and are no longer part of interstate traffic flow, they become subject to local taxation even if they were made elsewhere. This decision reinforced states' rights to levy taxes on out-of-state products sold within their borders without violating the Commerce Clause of the Constitution.

In the dissenting opinion for McGoldrick v. Felt & Tarrant Mfg. Co., Justice McReynolds argued that New York City's tax on goods manufactured outside of the state, but sold within its borders, was unconstitutional as it interfered with interstate commerce and violated the Commerce Clause of the U.S Constitution. He contended that such a tax placed an undue burden on out-of-state manufacturers and gave unfair advantage to in-state businesses, thereby disrupting free trade among states. Furthermore, he warned against allowing local jurisdictions to impose taxes which could potentially lead to retaliatory taxation from other states and create economic chaos across state lines.