In the 1906 case of New Mexico ex rel. E.J. McLean & Company v. Denver & Rio Grande Railroad Company, the Supreme Court was asked to determine whether a state could impose taxes on railroad companies for their interstate commerce activities within that state's borders. The plaintiff, E.J. McLean & Co., argued that they were unfairly taxed by New Mexico for goods transported across state lines via the defendant's railway system, asserting this violated federal law governing interstate commerce. The court ruled in favor of Denver and Rio Grande Railroad Company, stating that states have the right to tax property used in both intra- and inter-state commerce as long as it is done so fairly and without discrimination against out-of-state entities or interests involved in such trade operations. This decision upheld states' rights to levy taxes on businesses operating within their jurisdiction while also maintaining protections under federal laws regulating interstate commerce.

In the dissenting opinion for New Mexico ex rel. E.J. McLean & Company v. Denver & Rio Grande Railroad Company, Justice Harlan argued that the majority's decision was inconsistent with previous rulings and principles of justice. He contended that a state has jurisdiction over all property within its borders, including railroad tracks owned by out-of-state companies, and can therefore tax such properties as it sees fit to support public services like schools or roads. The majority's ruling effectively exempted interstate railroads from paying their fair share of taxes in states where they operate but are not headquartered, which Harlan saw as an unjust privilege granted to powerful corporations at the expense of local communities and governments.