In the case of Warren Trading Post Co. v. Arizona Tax Commission et al., 1964, the U.S. Supreme Court ruled that a state cannot impose a tax on an entity operating under federal license within a Native American reservation. The Warren Trading Post Company had been licensed by the Federal Government to trade with the Navajo Tribe on its reservation in Arizona and was assessed for unpaid taxes by the State of Arizona's Tax Commission for sales made there between 1957 and 1959. The company argued that this taxation infringed upon federal law which regulated trade with Native American tribes, while Arizona contended it was exercising its right as a state to levy taxes within its borders. The court sided with Warren Trading Post Company, stating that imposing such tax would interfere with Congress’s ability to regulate commerce with Native American tribes - an authority granted exclusively to Congress by Article I of Constitution - thereby violating principles of intergovernmental immunity.

In the dissenting opinion for Warren Trading Post Co. v. Arizona Tax Commission, Justice Harlan argued that the majority's decision to exempt a non-Indian company from state taxation on an Indian reservation was incorrect and inconsistent with prior case law. He contended that while Congress had broad powers over Indian affairs, it did not have exclusive authority in this area; states also retained some rights to regulate activities within their borders, including those involving Indians or occurring on reservations. Furthermore, he believed there was no clear congressional intent to bar state taxation of such businesses as evidenced by relevant statutes and legislative history. Therefore, he concluded that Arizona should be allowed to tax the trading post's income derived from its operations on the Navajo Reservation.