In the case of Southern Pacific Railroad Company v. California, 1895, the U.S. Supreme Court ruled in favor of Southern Pacific Railroad Company against a tax imposed by the state of California on interstate commerce. The court held that such taxation was unconstitutional as it violated the Commerce Clause which gives Congress exclusive power to regulate interstate commerce. The railroad company had been taxed for transporting goods and passengers across state lines, but argued this was an interference with federal authority over interstate trade. This decision reinforced federal supremacy in matters related to interstate commerce and limited states' ability to impose taxes or regulations on such activities.

In the dissenting opinion for Southern Pacific Railroad Company v. California, Justice Harlan argued that the state of California had a right to tax interstate commerce entities operating within its borders. He contended that such taxation did not interfere with federal control over interstate commerce as long as it was applied fairly and without discrimination against out-of-state businesses. The majority's ruling, he believed, effectively stripped states of their power to levy taxes on corporations doing business within their boundaries which could lead to serious financial implications for states' ability to fund public services and infrastructure projects. In his view, this decision undermined the balance between state and federal powers established by the Constitution.