From 1900 until about 1950 in the larger Black neighborhoods of major American cities "paper bag parties" are said to have taken place. People whose skin was not lighter than a brown paper bag were denied entry.
Context in which I encountered the term: A comment by Bint Alshamsa:
The arguments that are made for excluding transwomen are the same ones used for excluding women with disabilities and women of color. The deliberate exclusion of transwomen is nothing but the modern-day version of the Paper Bag Test.
(Comment found at this entry at the blog, Superbabymama.)