In the 1931 case of Stratton, Secretary of State of Illinois v. St. Louis Southwestern Railway Co., the U.S Supreme Court ruled in favor of St. Louis Southwestern Railway Co., stating that a state cannot impose taxes on interstate commerce activities which are beyond its jurisdictional boundaries. The dispute arose when Illinois attempted to tax the railway company for tracks it owned and operated outside the state's borders as part of an interstate network, arguing that these assets contributed to its overall value within Illinois. However, this was deemed unconstitutional by the court under what is known as "the Commerce Clause" (Article I, Section 8) which grants Congress exclusive power over interstate commerce regulation and prevents states from taxing or regulating such activity if it occurs outside their territorial limits.

In the dissenting opinion for Stratton v. St. Louis Southwestern Railway Co., Justice Stone argued that the majority's decision was inconsistent with previous rulings of the Court and violated principles of federalism by allowing a state to regulate interstate commerce in a way that could potentially disrupt uniform national regulation. He contended that Illinois' tax on out-of-state corporations doing business within its borders, based on total capital stock rather than just property or activities within Illinois, effectively taxed interstate commerce itself - something only Congress has power to do under the Commerce Clause of Constitution. Furthermore, he pointed out this taxation method could lead to multiple states taxing same income if other states followed suit, which would be burdensome and chaotic for businesses operating across state lines.