In the case of Query et al., Constituting The South Carolina Tax Commission, v. United States et al., 1941, the U.S Supreme Court ruled on a dispute over taxation between South Carolina and federal entities operating within its borders. The state had imposed an income tax on salaries paid by the federal government to employees working in federally-owned buildings located in South Carolina. However, these workers were performing duties related to national defense during World War II. The court held that states cannot impose taxes on individuals who are employed directly by the federal government for activities carried out under its constitutional powers - such as national defense - even if those activities take place within a state's boundaries. This decision reinforced principles of intergovernmental tax immunity and clarified that states do not have unlimited power to levy taxes against all economic activity occurring within their territory.

In the dissenting opinion for QUERY et al., CONSTITITING THE SOUTH CAROLOLINA TAX COMMISSION, v. UNITED STATES et al., 1941, it was argued that the majority's decision to exempt federal employees from state income tax violated principles of federalism and threatened states' fiscal autonomy. The dissenters contended that there is no constitutional or statutory provision explicitly granting such an exemption and thus, this interpretation by the court overstepped its boundaries. They further argued that this ruling could potentially lead to a situation where all government employees are exempted from paying any form of state taxes which would significantly undermine states' revenue sources and their ability to function independently. This view held that while intergovernmental tax immunity is important in maintaining balance between different levels of government, it should not be used as a tool for one level (the Federal Government) to unduly influence or control another (the State Governments).