In the 1923 case People of the State of New York v. Jersawit, Trustee in Bankruptcy of Ajax Dress Company, Inc., the U.S. Supreme Court was asked to determine whether a state could collect taxes from a bankrupt company's estate before other creditors were paid. The court ruled that under federal bankruptcy law, states did not have priority over other creditors when collecting unpaid taxes from a bankrupt debtor’s estate. This decision established an important precedent regarding how debts are prioritized during bankruptcy proceedings and clarified that federal law takes precedence over state laws in these matters.

The dissenting opinion in the case of People of the State of New York v. Jersawit, Trustee in Bankruptcy of Ajax Dress Company, Inc., argued that the majority's ruling was inconsistent with previous decisions made by the court regarding bankruptcy cases. The dissenting justices believed that a state should not be allowed to impose its own tax laws on a bankrupt company after it has been declared insolvent under federal law. They contended that allowing such action would undermine federal authority and create an imbalance between state and federal powers. Furthermore, they expressed concern over potential conflicts arising from different states imposing their own unique tax laws on bankrupt companies operating across multiple jurisdictions. In conclusion, they disagreed with the majority's decision because it contradicted established legal principles concerning bankruptcy and threatened to disrupt interstate commerce by creating uncertainty for businesses facing insolvency.