In the case of Territory of New Mexico v. Atchison, Topeka and Santa Fe Railway Company (1905), the Supreme Court ruled in favor of the railway company. The dispute arose when New Mexico attempted to tax railroad companies for their property within state boundaries, including tracks, rolling stock, and buildings. The railway company argued that this taxation was unconstitutional as it violated a federal law which exempted them from such taxes due to previous land grants given by Congress to aid in construction of railroads across public lands. The court agreed with the railway's argument stating that states could not impose taxes on properties granted by Congress under an act encouraging railroad development across unsettled territories.

In the dissenting opinion for the case Territory of New Mexico v. Atchison, Topeka and Santa Fe Railway Company, Justice Harlan argued that the majority's decision was a misinterpretation of both federal law and territorial legislation. He contended that Congress had not intended to grant railroads immunity from taxation by territories when it passed laws encouraging their construction in western states. Furthermore, he believed that the territorial legislature did have authority to tax railroad property within its borders as part of its general power to levy taxes for public purposes. In his view, this taxing power was an essential aspect of sovereignty which could not be abridged without clear legislative intent. Therefore, he disagreed with the majority's ruling that New Mexico lacked jurisdiction over interstate commerce companies like railroads operating within its territory.