In the case of Pacific Telephone & Telegraph Co. v. Seattle et al., 1933, the U.S Supreme Court ruled in favor of Pacific Telephone & Telegraph Company (PT&T). The city of Seattle had imposed a tax on PT&T's gross income derived from its telephone and telegraph business within the city limits. However, PT&T argued that this was unconstitutional as it violated their rights under both state and federal law by imposing an undue burden on interstate commerce. The Supreme Court agreed with PT&T's argument, stating that while cities have the right to impose taxes for revenue or regulation purposes, they cannot do so in a way that discriminates against or burdens interstate commerce excessively. Therefore, the court held that Seattle’s imposition of a tax based solely on gross receipts without considering whether those receipts were derived from intrastate or interstate commerce was indeed unconstitutional.

In the dissenting opinion for Pacific Telephone & Telegraph Co. v. Seattle et al., Justice McReynolds argued that the majority's decision was an overreach of judicial power and a violation of state rights, as it interfered with local government regulation of public utilities. He contended that there was no constitutional issue at stake in this case; rather, it involved a dispute between a city and its regulated utility company about rates set by municipal ordinance. The justice believed that such matters should be resolved at the local or state level without federal interference unless clear violations of constitutional rights were evident - which he did not believe to be true in this instance. He also expressed concern about potential negative impacts on other cities' ability to regulate their own utilities due to this ruling.