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That is the reason why Municipal bond interest cannot be taxed by the federal government, nor U.S. Treasury bond intrest cannot be taxed by states.

The Supreme Court ruled just as one state may not tax another, neither may a state tax federal government functions, nor federal government tax state government functions as that would be tatamount to a violation of each other's sovereignty and exercise of their separate powers.

A government can tax its own functions but not those of another government. Madison made the base principal behind the authority of federal government under the Constitution very clear.

James Madison, Federalist #39:

"The difference between a federal and national government, as it relates to the OPERATION OF THE GOVERNMENT, is supposed to consist in this, that in the former the powers operate on the political bodies composing the Confederacy, in their political capacities; in the latter, on the individual citizens composing the nation, in their individual capacities. On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character;"

Contrary to popular terminology we have a "NATIONAL" government under the Constitution not "FEDERAL". Just as we are a REPUBLIC and not a confederacy nor a "DEMOCRACY.

As far as Quotes and such being collectable by state, the may be asked to do so, but not compelled. The ultimate power the National government wields is the power to require compliance of the individual within the state, which is why all examples of the imposition of direct taxes included provision for the Federal government to demand payment of assessed federal tax immediately from the land owner should the state choose not to act as collection agent in gathering those taxes:

James Madison, Federalist #45:

"The change relating to taxation may be regarded as the most important; and yet the present [Continental] Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] Congress will have to require them of individual citizens;

The Courts enforce the Constitution limits of taxation in just that light.

We are not operating under the Articles of Confederation that some folks seem to want us to be, we are operating under the Constitution of the United States. The Articles failed and the nation almost dissolved over the inability of a "FEDERAL" government to enforce the collection of taxes from states short of going to war with them. That is one of the basic reasons why we now have the Constitution.