In the 1982 case North Dakota v. United States, the Supreme Court ruled on whether federal law preempted state laws that regulated liquor sales on military bases located within a state's borders. The State of North Dakota had enacted legislation requiring all alcoholic beverages sold at military installations in the state to be purchased from licensed wholesalers within the state. The U.S Department of Defense (DoD) had its own regulations allowing for direct purchase from out-of-state sources, which was often cheaper than purchasing through local wholesalers. In a unanimous decision, the court held that DoD regulations superseded conflicting provisions of North Dakota law under both statutory and constitutional principles of preemption because they interfered with federal objectives and functions related to national defense and fiscal policy.

In the dissenting opinion for North Dakota v. United States, the justice argued that federal instrumentalities should not be immune from non-discriminatory state taxes that do not interfere with their functions. The justice believed this case was an opportunity to reevaluate and abandon a doctrine which had been inconsistently applied in previous cases and lacked constitutional or statutory basis. They contended that there is no reason why a business conducted by the federal government should have advantages over privately-run businesses performing similar services, as it distorts competition and subsidizes inefficiency. Furthermore, they asserted that if Congress intended to grant such immunity, it could explicitly legiscribe so rather than relying on judicial inference.