The United States Supreme Court case, UNITED STATES v. STATE TAX COMMISSION OF MISSISSIPPI et al., 1972, revolved around the issue of whether a state can impose sales tax on purchases made by federal employees at military base exchanges and commissaries. The State Tax Commission of Mississippi imposed such a tax which was challenged by the U.S government arguing that it violated intergovernmental immunity principles. However, the Supreme Court ruled in favor of Mississippi stating that there is no constitutional prohibition against states imposing nondiscriminatory taxes on individuals who are federal employees or contractors simply because their income is derived from the Federal Government or its instrumentalities. The court held that as long as these taxes do not discriminate against the Federal Government and only have an indirect impact on it, they are permissible under law.

In the dissenting opinion for United States v. State Tax Commission of Mississippi, Justice Rehnquist argued that the majority's decision to exempt federal instrumentalities from state taxation was an overextension of constitutional principles. He contended that this exemption should only apply when a tax would interfere with a federal function or discriminate against it. In his view, Mississippi’s liquor tax did not meet these criteria as it applied equally to all vendors and consumers in the state regardless of whether they were federally affiliated or not. Furthermore, he pointed out that there was no evidence showing any adverse impact on military operations due to this tax law. Therefore, he believed that states should be allowed to impose non-discriminatory taxes on sales made by federal entities within their jurisdiction.