In the Southern Pacific Railroad Company v. United States case of 1897, the Supreme Court ruled on a dispute over taxation between the railroad company and the federal government. The court held that a tax imposed by California on interstate commerce was unconstitutional as it violated Article I, Section 8 of the U.S Constitution which grants Congress exclusive power to regulate interstate commerce. This decision marked an important precedent in limiting state interference with interstate commerce and reinforced federal supremacy in this area under what is known as "the Commerce Clause". Furthermore, it established that states could not impose taxes or duties on goods transported across state lines for sale without violating this clause. Thus, reinforcing free trade among states within America's national market system.

In the dissenting opinion for Southern Pacific Railroad Company v. United States, Justice Harlan argued that the majority's interpretation of the law was incorrect and overly broad. He contended that Congress did not intend to grant railroads a blanket exemption from all taxation when it passed legislation granting them certain lands in California. Instead, he believed that this exemption only applied to taxes on those specific land grants themselves, not on other property or income derived by the railroad company. Furthermore, he asserted that if Congress had intended such a sweeping tax exemption, they would have explicitly stated so in their legislation rather than leaving it open to interpretation by courts later down the line.