Final answer:
The Supreme Court case that established a state cannot tax a federal entity was McCulloch v. Maryland (1819). The ruling reinforced the doctrine of national supremacy and implied powers, preventing states from taxing federal institutions.
Step-by-step explanation:
The Supreme Court case that ruled a state had no right to tax a legitimate federal institution was McCulloch v. Maryland (1819). This landmark case established that under the supremacy clause of Article VI, federal laws have precedence over conflicting state laws. The case centered around the Second Bank of the United States, which Maryland had attempted to tax in order to favor state-chartered banks.
The Supreme Court, led by Chief Justice John Marshall, stated that the act to incorporate the Bank of the United States was constitutional, forming part of the supreme law of the land. The decision emphasized the concept of implied powers under the necessary and proper clause and declared that states could not impair the functioning of the federal government. As a result, the principle of national supremacy was firmly established, safeguarding federal entities against destructive state taxation.