In the 1904 case of Pabst Brewing Company v. Crenshaw, the U.S. Supreme Court ruled in favor of Pabst Brewing Company, a Wisconsin-based beer manufacturer that had been sued by Mississippi tax collector J.F. Crenshaw for unpaid taxes on alcohol sold in his state. The court held that under the Commerce Clause of the Constitution, states cannot impose direct taxes on goods from other states simply because they are transported into their territory and stored there for future sale or use. This decision was based on previous rulings which established that such actions would interfere with interstate commerce and were therefore unconstitutional. The ruling clarified an important aspect of federalism: while states have broad powers to regulate activities within their borders, these powers do not extend to interfering with interstate commerce - a power reserved exclusively for Congress under Article I Section 8 Clause 3 (the "Commerce Clause") of the U.S Constitution.

The dissenting opinion in the PABST BREWING COMPANY v. CRENSHAW case argued that the Mississippi statute, which imposed a tax on out-of-state breweries selling beer within its borders, did not violate the Commerce Clause of the U.S. Constitution as it was an exercise of state police power to regulate alcohol sales and consumption for public health and safety reasons. The justice disagreed with majority's view that this law discriminated against interstate commerce because it taxed only foreign beers while exempting domestic ones from taxation. He believed that states have inherent authority to control liquor traffic within their boundaries under their police powers, including levying taxes or fees on businesses involved in such trade regardless of where they are located or incorporated. Furthermore, he contended that any potential burden on interstate commerce resulting from this tax is incidental and permissible under established constitutional principles allowing states some latitude in regulating local affairs even if they indirectly affect national commercial activities.