In the case of Southern Natural Gas Corp. et al. v. Alabama in 1936, the Supreme Court ruled that a state could not tax interstate natural gas pipelines for gas transported and sold within its borders without violating the Commerce Clause of the U.S Constitution. The State of Alabama had imposed a privilege tax on Southern Natural Gas Corporation, an interstate pipeline company transporting and selling natural gas from Louisiana to various states including Alabama itself. The court held that such taxation was discriminatory against interstate commerce as it subjected out-of-state companies to higher taxes than those levied on local businesses engaged in similar activities within the state's boundaries.

In the dissenting opinion for Southern Natural Gas Corp. et al. v. Alabama, Justice Cardozo expressed his disagreement with the majority's decision that a state tax on interstate gas sales was unconstitutional due to its interference with interstate commerce. He argued that the tax did not discriminate against or burden out-of-state businesses because it applied equally to all companies selling natural gas in Alabama, regardless of whether they were based within or outside of the state. Furthermore, he contended that there was no evidence showing this tax would lead other states to impose retaliatory taxes on their own local businesses engaged in interstate commerce, which could potentially disrupt national economic unity and harmony among states - one of the main concerns underlying Commerce Clause jurisprudence at that time.