In the case of Pacific Telephone & Telegraph Co. v. Tax Commission of Washington, 1935, the Supreme Court ruled in favor of the state tax commission. The dispute arose when Pacific Telephone and Telegraph Company challenged a property tax assessment by arguing that it was discriminatory and violated their rights under both federal law and constitution's equal protection clause because other types of businesses were not taxed at similar rates for their intangible properties. However, the court held that there was no discrimination as all companies within same class (public service corporations) were treated equally with respect to taxation on intangible values associated with tangible property used in operations within Washington State. Furthermore, they stated that states have wide discretion in determining classifications for tax purposes so long as those classifications are reasonable and not arbitrary or capricious.

In the dissenting opinion for Pacific Telephone & Telegraph Co. v. Tax Commission of Washington, Justice Stone argued that the majority's decision to strike down a state tax on interstate commerce was incorrect and inconsistent with previous rulings by the Court. He contended that there is no constitutional prohibition against states taxing property used in interstate commerce as long as it does not discriminate against or unduly burden such commerce. In this case, he believed that the tax imposed by Washington State did neither of these things; rather, it simply required companies like Pacific Telephone & Telegraph to pay their fair share for public services provided by the state. Furthermore, he pointed out inconsistencies between this ruling and earlier decisions where similar taxes were upheld when levied on railroad properties engaged in both intrastate and interstate business.