In the case of Travis v. Yale & Towne Manufacturing Company (1919), the U.S Supreme Court ruled in favor of Yale & Towne Manufacturing Co., a Connecticut-based company that had been taxed by New York for having an office and salesmen there. The court held that New York's taxation was unconstitutional because it violated due process rights under the Fourteenth Amendment, as well as interstate commerce regulations. The ruling clarified that states cannot tax corporations based on their activities within state borders if those activities are merely incidental to interstate commerce, such as soliciting orders or maintaining a small office space. This decision significantly limited states' abilities to tax out-of-state companies operating within their borders and set important precedents regarding corporate taxation and interstate commerce.

In the dissenting opinion for Travis v. Yale & Towne Manufacturing Company, Justice Holmes argued that the New York statute in question did not violate the Due Process Clause of the Fourteenth Amendment. He contended that a state has every right to tax its citizens and corporations on their entire net income, regardless of where it was earned. According to him, this is because these entities benefit from being domiciled in such states through protection by its laws and services provided by it. Furthermore, he disagreed with majority's interpretation of 'source' as physical location where income was generated; instead he believed source should be interpreted as legal or economic origin which could include domicile state too if taxpayer's business operations were managed there even though physically located elsewhere.