In the case of Posados, Collector of Internal Revenue v. Warner, Barnes & Company Ltd., 1928, the U.S Supreme Court ruled in favor of Posados. The dispute arose when Warner, Barnes & Co., a corporation organized under Philippine law but owned by American citizens and corporations, claimed that it was exempt from certain taxes imposed by the Philippine government because they were not applied to domestic corporations. They argued this violated their rights under both the due process clause and equal protection clause of the Fourteenth Amendment. However, Justice Sutherland writing for majority held that while these constitutional protections apply to all persons within United States territories regardless of nationality or citizenship status; they do not necessarily prohibit differential taxation based on foreign or domestic ownership as long as there is reasonable basis for such distinction which can be justified by relevant differences between entities being taxed differently.

In the dissenting opinion for Posados, Collector of Internal Revenue v. Warner, Barnes & Company Ltd., Justice Oliver Wendell Holmes Jr. argued that the majority's decision was inconsistent with previous rulings and principles of international law. He contended that a tax imposed by Puerto Rico on goods imported from the United States should not be considered as an import duty but rather as an excise tax which is permissible under U.S law. Furthermore, he disagreed with the majority’s interpretation of “foreign country” in relation to Puerto Rico within context of tariff laws arguing it contradicts earlier decisions where Puerto Rico was treated domestically for customs purposes after becoming a territory of US post Spanish-American War in 1898. Thus, according to him, this case represented a departure from established precedent without sufficient justification or explanation.