                   IN THE COURT OF APPEALS OF TENNESSE

                         EASTERN SECTION AT KNOXVILLE                FILED
                                                                      January 13, 1998

                                                                     Cecil Crowson, Jr.
DEROYAL INDUSTRIES, INC.,                        )                   Appellate C ourt Clerk
                                                 )   CLAIBORNE CHANCERY
      Plaintiff/Appellee,                        )
                                                 )   NO. 03A01-9708-CH-00328
v.                                               )
                                                 )   HON. BILLY JOE WHITE
RUTH E. JOHNSON,                                 )   CHANCELLOR
COMMISSIONER OF REVENUE,                         )
STATE OF TENNESSEE,                              )
                                                 )
      Defendant/Appellant                        )   VACATED



John Knox Walkup and Sean P. Scally, Nashville, for the Appellant.

Dale C. Allen and H. Bruce Guyton, Knoxville, for the Appellee.


                                               OPINION

                                                     INMAN, Senior Judge

      This is a sales tax deficiency case. The taxpayer filed a determinative

action in the Chancery Court of Claiborne County against the Commissioner of

Revenue, who filed a motion to dismiss alleging improper venue. The motion

was denied, and the case proceeded to judgment. The Commissioner appeals,

insisting, inter alia, that the Chancellor erred in holding that Claiborne County

was a proper venue.

      The plaintiff was granted a Charter by the State in 1978. According to

the Charter, its corporate, registered and principal address is “DeRoyal

Industries, Inc., 200 DeBusk Lane, Powell, Tennessee, 37849.” 1



      The plaintiff sells equipment to the health care industry, and conducts its


      1
          Powell is situated in Knox County.
business in various counties within Tennessee and elsewhere in the several states.

According to John Sharp, the treasurer and corporate controller of the plaintiff,

who described the various corporate divisions of the plaintiff, the corporate

division, situated in Powell, Tennessee, is responsible for “sales, general and

administrative functions, marketing people, human resources, finances,

information systems, all of the administrative support, all of the marketing

support, and the sales support.”

      Following an audit by the Department of Revenue, a Notice of the

Assessment was issued to the plaintiff, which had purchased certain equipment

allegedly used in the manufacturing process and therefore exempt from sales tax.

The accuracy of the assessment is challenged by the plaintiff in this litigation.

      T.C.A. § 67-1-1803(a) provides:

      “The subject matter jurisdiction shall be and the venue of suits filed
      pursuant to Acts 1986, Ch. 749 [T.C.A. § 67-1-1080, et. seq.] shall
      lie in the Chancery Court of either Davidson County or in the county
      in Tennessee of the taxpayer’s domicile or in the county in which the
      taxpayer has the taxpayer’s place of business in Tennessee.”

      Because tax suits implicate state sovereignty, they “can be maintained

only in the manner and upon the conditions consented to by the State.” Jack

Daniels Distillery, Inc. v. Olsen, 716 S.W.2d 496 (Tenn. 1986).

      The appellee argues that since its principal place of business in

Tennessee is in Claiborne County, where “most of its manufacturing and

fabricating processes take place,” and that ‘domicile’ is not the same as

‘principal place of business,’its selection of Claiborne County as a venue for

filing this action was proper.



      The Commissioner argues that the taxpayer’s principal place of business

is Powell, Tennessee, within the meaning of T.C.A. § 67-1-1803(a). We agree.


                                        2
      In Express Co. v. Patterson, 122 Tenn. 279 (Tenn. 1904), the Supreme

Court ruled that the term “principal office or place of business” means

‘especially in connection with taxation,’ the domicile of the corporation, citing

Grundy County v. T. C. I. Railroad Co., 94 Tenn. 308 (Tenn. 1894). The Court

added:

      “The residence or ‘domicile’ of a corporation under our statute is the
      county where the Charter is registered . . . and it is the place where
      the governing power of the corporation resides and is exercised, and
      not the place where its ordinary business is conducted.”

      The judgment is vacated and the suit is dismissed without prejudice.

The remaining issue involving the authority of the Commissioner to

compromise a tax dispute without the written concurrence of the Comptroller

and Attorney General is pretermitted.

      Costs are assessed to the appellee.



                                             ___________________________
                                             William H. Inman, Senior Judge

CONCUR:



__________________________
Herschel P. Franks, Judge



__________________________
Don T. McMurray, Judge




                                        3
