The U.S. Supreme Court case Standard Oil Company of California v. Johnson, Treasurer of California in 1941 revolved around the issue of whether a state could impose a tax on sales made to federal instrumentalities without violating the Supremacy Clause or interfering with Federal functions. The State of California imposed a tax on motor vehicle fuel sold by Standard Oil within its boundaries, including sales to federal agencies and departments such as post offices and military bases. Standard Oil argued that this was unconstitutional because it interfered with Federal operations and violated the principle that states cannot directly tax the Federal government (the doctrine of intergovernmental tax immunity). However, the Supreme Court ruled against Standard Oil, stating that while direct taxation from states upon federal activities is prohibited under constitutional law, indirect taxes where economic burden might be passed along are not necessarily so forbidden unless they seriously interfere with governmental functions.

In the dissenting opinion for Standard Oil Company of California v. Johnson, Justice Frank Murphy argued that the majority's decision to uphold a tax imposed by California on out-of-state oil companies violated the Commerce Clause of the U.S. Constitution. He contended that this tax unfairly burdened interstate commerce and gave an unfair advantage to in-state businesses over their out-of-state competitors, thus violating principles of economic equality and fairness. Furthermore, he expressed concern about potential retaliation from other states against Californian businesses as a result of this ruling. Ultimately, he believed that it was not within a state's power to impose such taxes on interstate commerce without Congressional approval.