In the case of United States v. Tax Commission of Mississippi et al., 1974, the Supreme Court ruled that federal instrumentalities such as military bases and national parks are not subject to state taxation. The court held that a tax imposed by Mississippi on sales made within these areas was unconstitutional because it interfered with federal sovereignty. This decision upheld the longstanding principle of "intergovernmental tax immunity," which prevents one level of government from taxing another. The ruling clarified that this doctrine applies even when a state seeks to tax private entities operating within federally controlled territories.

In the dissenting opinion for United States v. Tax Commission of Mississippi et al., Justice William O. Douglas argued that the majority's decision to grant tax exemptions to religious organizations violated the Establishment Clause of the First Amendment, which prohibits government endorsement or support of religion. He contended that by providing a financial benefit in form of tax exemption, it was essentially promoting and supporting religious institutions over non-religious ones, thereby breaching constitutional principles separating church and state. Furthermore, he expressed concern about potential abuses where any organization could claim a religious purpose to avoid taxation. Ultimately, Douglas believed that all entities should be subject to equal taxation without regard for their religious affiliations or purposes.