In the 1941 case of Memphis Natural Gas Co. v. Beeler, Attorney General of Tennessee, et al., the U.S Supreme Court ruled in favor of Memphis Natural Gas Company (MNGC). The issue at hand was whether or not MNGC should be taxed by the state for gas transported through interstate commerce from Texas to Tennessee. The State argued that since MNGC had a physical presence and operations within its borders, it could levy taxes on all their activities including those involving interstate commerce. However, citing previous rulings such as Western Live Stock v. Bureau of Revenue and Adams Manufacturing Co v Storen which established that states cannot tax goods moving in interstate commerce nor can they impose a direct tax on gross receipts derived therefrom respectively; the court held that this taxation violated both principles hence was unconstitutional under Commerce Clause protections against state interference with interstate trade.

In the dissenting opinion for Memphis Natural Gas Co. v. Beeler, Justice Black argued that the majority's decision was a departure from previous interpretations of the Commerce Clause and an unwarranted intrusion into state affairs. He contended that Tennessee had every right to tax natural gas transported within its borders, even if it originated out-of-state, as long as it did not discriminate against interstate commerce or place undue burdens on it. The fact that this gas was destined for resale did not exempt it from taxation; such exemptions were traditionally granted by states themselves rather than imposed by federal courts interpreting the Constitution. Furthermore, he expressed concern about potential implications of this ruling on other industries and warned against expanding federal power at expense of states' rights.