In the case of Spector Motor Service, Inc. v. O'Connor, Tax Commissioner in 1950, the U.S Supreme Court ruled that a state tax imposed on out-of-state corporations for "the privilege of doing business" within the state was unconstitutional when applied to interstate commerce activities. The Connecticut-based company Spector Motor Service had been taxed by Connecticut's Tax Commissioner under this law and challenged it as an infringement upon their right to engage in interstate commerce free from discriminatory taxation. The court held that while states could levy taxes on businesses operating within their borders for various reasons (such as property or income), they could not impose a tax simply for conducting interstate business because it would interfere with Congress' power over such commerce granted by the Commerce Clause of the Constitution.

In the dissenting opinion for Spector Motor Service, Inc. v. O'Connor, Justice Frankfurter disagreed with the majority's interpretation of interstate commerce and its application to state taxation powers. He argued that a corporation should not be exempt from paying taxes simply because it is involved in interstate commerce; rather, he believed that states have the right to tax corporations as long as they do so fairly and without discrimination against out-of-state businesses. Furthermore, he contended that there was no evidence of such discrimination in this case since all corporations operating within Connecticut were subject to the same franchise tax regardless of whether their business activities crossed state lines or not. Thus, according to Justice Frankfurter’s view, Spector Motor Service should be required to pay Connecticut's franchise tax just like any other corporation doing business in the state.