In the case of Southern Pacific Co. v. Commonwealth of Kentucky, 1911, the U.S Supreme Court ruled in favor of the Commonwealth of Kentucky. The issue at hand was whether a state could tax tangible personal property located and used exclusively outside its borders but owned by a corporation doing business within that state. The Southern Pacific Company argued that this taxation violated their Fourteenth Amendment rights to due process and equal protection under law as it taxed property not situated within Kentucky's jurisdictional boundaries. However, the court upheld Kentucky’s right to levy such taxes on corporations operating within its territory regardless if some assets were physically located elsewhere. It reasoned that corporations are artificial entities created by states which have certain inherent powers over them including taxation; thus they can be taxed based on total capital without violating constitutional protections against deprivation of property without due process or denial equal protection under law.

In the dissenting opinion for Southern Pacific Co. v. Commonwealth of Kentucky, Justice Oliver Wendell Holmes Jr., joined by Justices Harlan and Lurton, argued that the state had a right to tax corporations operating within its borders even if they were incorporated in another state. He disagreed with the majority's view that this constituted double taxation or interfered with interstate commerce. Holmes asserted that states should have broad powers to regulate their own economies and protect their citizens from potentially harmful corporate practices. He also contended that corporations benefited from operating in different states and thus should be expected to pay taxes accordingly.