In Sullivan, Tax Commissioner of Connecticut, et al. v. United States et al., the Supreme Court ruled in 1968 that a state cannot impose an inheritance tax on federal securities held by a resident at the time of their death. The case arose when Connecticut imposed such a tax on the estate of a deceased resident who had owned U.S government bonds. The executors of the estate sued to recover this money arguing that under federal law, these bonds were exempt from state taxation and won in lower courts. The Supreme Court affirmed these rulings stating that while states have broad powers to levy taxes, they do not extend to direct taxation on Federal property or activities without consent from Congress as it would interfere with Federal supremacy and sovereignty granted by Constitution's Supremacy Clause (Article VI). This decision reinforced principles established earlier in McCulloch v Maryland (1819) where court declared "the power to tax involves the power to destroy" which could undermine operations and existence of Federal Government if states were allowed unrestricted taxing authority over its assets.

In the dissenting opinion for Sullivan, Tax Commissioner of Connecticut, et al. v. United States et al., Justice Harlan disagreed with the majority's view that a state tax on federal obligations was unconstitutional under the Supremacy Clause. He argued that this interpretation went against historical precedent and could potentially disrupt state taxation systems across the country. Justice Harlan pointed out that states had been taxing federal obligations without issue since 1913 when Congress first authorized them to do so, suggesting there was no constitutional problem with such taxes until now as per majority’s ruling. Furthermore, he warned about potential negative consequences of this decision on states' ability to raise revenue through taxation if they were barred from taxing certain types of income derived from federal sources.