In the case of Silas Mason Co. et al. v. Tax Commission of Washington et al., 1937, the Supreme Court ruled on whether a state could tax out-of-state corporations for their in-state activities without violating the Due Process Clause or Commerce Clause of the Constitution. The Silas Mason Company was an Arizona corporation that had contracted with Washington State to construct a tunnel under Lake Washington and had purchased materials from within and outside of Washington to fulfill this contract. The company argued that it should not be subject to taxation by Washington as it was not "doing business" there but merely fulfilling its contractual obligations. The court held that states have jurisdiction over all property within their borders, including personal property brought into the state temporarily for use in performing contracts, regardless if they were bought elsewhere or owned by non-residents; hence such properties are subject to taxation by those states without infringing upon constitutional rights provided due process is observed. This ruling affirmed states' authority to levy taxes on businesses operating within their boundaries even if these businesses are incorporated elsewhere.

In the dissenting opinion for Silas Mason Co. v. Tax Commission of Washington, Justice McReynolds disagreed with the majority's decision to uphold a state tax on federal contractors as constitutional. He argued that this ruling violated principles of intergovernmental tax immunity and could potentially lead to states imposing burdensome taxes on federal activities, thereby interfering with national functions and policies. Furthermore, he contended that such taxation would create an unequal playing field among businesses competing for government contracts since those in non-taxing states would have a financial advantage over those in taxing ones. In his view, only Congress should have the power to decide whether or not its contractors can be subjected to state taxation.