In the United States v. Chicago North Shore & Milwaukee Railroad Co., 1932, the U.S Supreme Court ruled in favor of the federal government's right to tax a railroad company for its income derived from interstate commerce. The case arose when the Chicago North Shore & Milwaukee Railroad Company challenged an imposed federal income tax on their earnings from interstate transportation services, arguing that it was unconstitutional as per Article I, Section 8 of the Constitution which grants Congress power over interstate commerce. However, Justice Benjamin Cardozo writing for majority held that while states cannot interfere with or impose burdens on interstate commerce without congressional approval (the dormant Commerce Clause), this does not exempt companies engaged in such activities from general taxation by Congress itself under its taxing and spending powers granted by Article I, Section 8. Thus affirming lower court rulings upholding validity of said taxes.

In the dissenting opinion for United States v. Chicago North Shore & Milwaukee Railroad Co., Justice Stone argued that the Interstate Commerce Commission (ICC) did not have authority to regulate intrastate rates of an interstate carrier, even if those rates affected interstate commerce. He contended that Congress had only given ICC power over matters directly related to interstate commerce and not indirect ones such as intrastate fares. The majority's interpretation would allow federal control over all aspects of a business involved in both intra- and inter-state trade, which he believed was beyond what Congress intended when it created the ICC. Furthermore, he expressed concern about potential harm to state sovereignty from this broad interpretation of federal regulatory powers.