In the case of Panhandle Oil Company v. Mississippi ex rel. Knox, Attorney General (1927), the U.S Supreme Court ruled on a dispute involving state taxation and interstate commerce. The State of Mississippi had imposed a tax on gasoline that was purchased out-of-state but intended for sale within its borders. The Panhandle Oil Company challenged this law, arguing it violated the Commerce Clause of the U.S Constitution by placing an undue burden on interstate commerce. The court upheld Mississippi's right to impose such taxes in a 5-4 decision, stating that while states cannot interfere with or discriminate against interstate commerce directly, they can indirectly influence it through legitimate exercises of their taxing power as long as those measures do not create direct burdens or obstructions to trade between states. This ruling marked an important shift in how courts interpreted restrictions placed upon state powers under the Commerce Clause and set precedent for future cases dealing with similar issues.

In the dissenting opinion for Panhandle Oil Company v. Mississippi ex rel. Knox, Justice Oliver Wendell Holmes Jr., joined by Justices Louis Brandeis and Harlan Fiske Stone, argued that the tax imposed by Mississippi on gasoline brought into the state from elsewhere did not violate the Commerce Clause of the Constitution. He reasoned that while it was true that interstate commerce should be free from discriminatory taxes, this principle did not apply to a non-discriminatory tax applied equally to all gasoline sold within a state's borders regardless of its origin. The justices contended that such taxation is part of a state's inherent power to raise revenue and does not interfere with Congress' authority over interstate commerce unless it discriminates against out-of-state goods or directly regulates interstate transactions.