In the case of The Yazoo and Mississippi Valley Railroad Company v. City of Vicksburg, 1907, the U.S Supreme Court ruled in favor of the railroad company. The city had imposed a tax on all railroads operating within its limits but did not apply this tax to other types of businesses. The court found that this selective taxation was discriminatory and violated both state law and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Therefore, it held that such taxes could not be collected from only one type or class of property or business while exempting others without just cause or reason.

In the dissenting opinion for The Yazoo and Mississippi Valley Railroad Company v. City of Vicksburg, it was argued that the city's imposition of a tax on the railroad company violated contractual obligations between both parties. The justice contended that an existing agreement exempted the railroad from any form of taxation by local authorities in exchange for annual payments to support public schools. This contract, according to him, should be respected as per Article 1 Section 10 Clause 1 (the Contract Clause) of the U.S Constitution which prohibits states from passing laws impairing contracts' obligation. He further stated that this case is not about whether or not railroads are subject to state taxes but rather if a valid contract can be unilaterally altered by one party - in this case, by imposing additional taxes contrary to what was agreed upon initially.