In the 1923 case of R.E. Sheehan Company et al. v. Shuler, as State Treasurer of the State of New York, et al., the U.S Supreme Court dealt with a dispute over taxation laws in New York state. The plaintiffs were corporations involved in public works contracts who challenged a tax imposed by New York on their gross receipts from these contracts, arguing that it violated both federal and state constitutions because it was an unapportioned direct tax and interfered with interstate commerce. However, the court ruled against them stating that this did not violate any constitutional provisions nor interfere with interstate commerce since they had voluntarily entered into those contracts knowing about such taxes beforehand.

In the dissenting opinion for R.E. Sheehan Company et al. v. Shuler, Justice McReynolds argued that the majority's decision was a departure from established principles of constitutional law and taxation policy. He contended that New York State had no right to tax out-of-state corporations on their total capital when only a portion of it was used within state borders, as this amounted to extraterritorial taxation which is unconstitutional under the Due Process Clause of the Fourteenth Amendment. Furthermore, he disagreed with the majority's interpretation of "doing business" in relation to foreign corporations operating within New York State; asserting that merely having an office or employees in New York did not constitute doing business there if these entities were primarily involved in interstate commerce activities rather than intrastate ones.