The U.S. Supreme Court case Southern Railway Co. v. Virginia in 1933 revolved around the issue of whether a state could impose taxes on an interstate railway company for its use of rail lines within that state, even if those lines were owned by another entity and leased to the interstate company. The Southern Railway Company argued that this taxation was unconstitutional as it interfered with interstate commerce and violated the Fourteenth Amendment's due process clause because they were being taxed for property they did not own or control. However, the Supreme Court ruled against Southern Railway Co., upholding Virginia's right to tax them based on their usage of railways within its borders regardless of ownership status. The court stated that such taxation does not interfere with interstate commerce since it is applied equally to all companies operating in Virginia, including intrastate ones; thus there is no discrimination against out-of-state entities which would violate Commerce Clause protections. Furthermore, regarding due process concerns under the Fourteenth Amendment, while acknowledging that states cannot tax property outside their jurisdiction or without connection to taxable activities within their boundaries (a principle known as "jurisdictional nexus"), here sufficient nexus existed given Southern’s extensive use and deriving substantial benefits from these tracks despite non-ownership.

In the dissenting opinion for Southern Railway Co. v. Virginia, Justice McReynolds disagreed with the majority's decision that a state could impose taxes on an interstate commerce company based on its total income from within and outside of the state. He argued that this was in violation of due process rights under the Fourteenth Amendment as it allowed states to tax beyond their jurisdictional boundaries. According to him, such taxation would lead to multiple impositions by different states which is unfair and burdensome for businesses operating across several jurisdictions. He also pointed out potential issues related to determining what portion of income should be attributed to operations within a particular state when business activities are intertwined across various locations.