Mb. Chibe Justice BubNett
delivered the opinion of the Court.
The Tennessee General Assembly, in 1963, passed the Local Option Revenue Act,1 codified as T.C.A. 67-3049 through 67-3056.2 The purpose of LORA was to create a new source of revenue for city and county governments by empowering them to adopt a local sales tax not in excess of one third of the state sales tax rate.
[322]*322The present case is a dispute between Loudon County and Lenoir City, a municipal corporation within the county, concerning the construction and constitutionality of the LORA.
In January, 1964, according to the grant of authority in the LORA, the Lenoir City Counsel adopted an ordinance calling for a city sales tax referendum. Forty days passed after the enactment of the ordinance without the Loudon County Court calling a county-wide sales tax referendum. Lenoir City voters approved the sales tax March 10, 1964. After levying the sales tax Lenoir City issued two and one-half million dollars of general obligation bonds to finance the construction of a new high school. Lenoir City pledged all its sales tax revenues to the retirement of the bonds.
A resolution to levy a county-wide sales tax in the same amount as Lenoir City subject to a referendum issued from the London County Court October 17, 1967. In accordance with T.C.A. 67-3053 (b) only the voters of Loudon County residing outside the Lenoir City cor[323]*323porate limits voted in tie referendum, the amount of the tax being the same as that adopted by the city. The resolution carried and the sales tax was levied countywide.
The statutory method of distribution (Sec. 67-3052, T.C.A.) of the county-wide sales tax revenues will, at the end of the fiscal year, mean a sixteen to twenty thousand dollar reduction in Lenoir City’s sales tax revenues. To prevent the expected revenue loss Lenoir City and several city residents brought suit against Loudon County in the Loudon Chancery Court.
The complainants’ major contentions were: (1) T.C.A. 67-3051 should be construed to mean that after the passage of a city ordinance calling for a sales tax referendum, the county wherein such city is located must within forty days call for a county-wide referendum or forfeit [324]*324its authority to thereafter levy a sales tax; (2) T.C.A. 67-3053 (b) deprives city residents of equal protection of the law; (3) the levy of the sale tax by London County unconstitutionally impaired the obligation of Lenoir City to retire its bonded indebtedness; (4) Loudon County was equitably' estopped from enacting the county-wide tax, thereby reducing Lenoir City’s revenue after the city had enacted the tax and pledged the revenue to retire its bonds.
• The Chancellor held that LOBA was constitutional but that the enactment of the .sales tax by Loudon County without the approval of the Lenoir City voters was an unconstitutional impairment of the city’s contract to use the sales tax revenues to retire its bonds. The Chancellor ordered that Lenoir City should continue to receive all the revenues produced by the sales tax within its borders and that the revenues from the tax on sales made within Loudon County but outside Lenoir City should go to the county government. Loudon County appealed.
The opinion of this Court is that although the Chancellor is correct about the constitutionality of the LOBA, his holding that the enactment of the sales tax by Loudon County unconstitutionally impaired a contract of Lenoir City is clearly erroneous. Likewise, the method of dis-' tribution-ordered by the Chancellor is patently contrary to the language of T.C.A. 67-3052.
Pour issues- now appear in this appeal. Firstly, what is the proper construction of T.C.A. 67-3051? The appellee, Lenoir City, contends that the statute means that the passage of a city ordinance levying a sales tax subject to. a referendum • perpetually bars the county wherein'-'such city is located from levying a county sales [325]*325tax unless within forty days after the enactment of the city ordinance the county court calls for a county-wide sales tax referendum. The appellee’s contention is based upon an alleged implication contained in the last sentence of T.C.A. 67-3051:
“If the tax levied [within the forty day suspension period] by a quarterly county court is finally determined to he nonoperative, such action shall not preclude subsequent action by the county to adopt the tax * * V’
The appellees argue that the foregoing sentence implies that after a city ordinance providing for a sales tax referendum has been enacted that a county can preserve its authority to levy a sales tax at some future time only by calling for a referendum within forty days of the passage of the city ordinance.
This Court finds no such implication in the last sentence of T.C.A. 67-3051. The sentence should not be read to mean that the county, when faced with a city ordinance calling for a sales tax referendum, must resolve within forty days to hold a referendum on a county-wide tax or forfeit its authority to do so. Correctly interpreted, the sentence in question merely means that if the county does call a referendum within the forty day suspension period and the referendum fails, the referendum’s failure does not preclude imposition of the tax at a future date.
The Legislature did not intend T.C.A. 67-3051 to restrict a county’s freedom to determine the appropriate time for levying a county sales tax. The statute empowers both cities and counties to adopt a local sales tax and details the procedure for levying the tax. If a city acts first, its ordinance calling a sales tax referendum is [326]*326automatically suspended for forty days to allow the county court an opportunity to call a county-wide referendum. The forty day suspension period is not designed to force the county to act immediately or not at all hut to offer the county an opportunity to initiate the tax. If the county court, within the forty days resolves to hold a county-wide referendum and the electorate adopts the sales tax the city’s ordinance is rendered null and the tax will be effective county-wide.
The city sales tax referendum will be held pursuant to the ordinance if the county court does not, within forty days of the passage of the city ordinance, call a countywide sales tax referendum or if a county-wide referendum is called within the forty days but fails.
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Mb. Chibe Justice BubNett
delivered the opinion of the Court.
The Tennessee General Assembly, in 1963, passed the Local Option Revenue Act,1 codified as T.C.A. 67-3049 through 67-3056.2 The purpose of LORA was to create a new source of revenue for city and county governments by empowering them to adopt a local sales tax not in excess of one third of the state sales tax rate.
[322]*322The present case is a dispute between Loudon County and Lenoir City, a municipal corporation within the county, concerning the construction and constitutionality of the LORA.
In January, 1964, according to the grant of authority in the LORA, the Lenoir City Counsel adopted an ordinance calling for a city sales tax referendum. Forty days passed after the enactment of the ordinance without the Loudon County Court calling a county-wide sales tax referendum. Lenoir City voters approved the sales tax March 10, 1964. After levying the sales tax Lenoir City issued two and one-half million dollars of general obligation bonds to finance the construction of a new high school. Lenoir City pledged all its sales tax revenues to the retirement of the bonds.
A resolution to levy a county-wide sales tax in the same amount as Lenoir City subject to a referendum issued from the London County Court October 17, 1967. In accordance with T.C.A. 67-3053 (b) only the voters of Loudon County residing outside the Lenoir City cor[323]*323porate limits voted in tie referendum, the amount of the tax being the same as that adopted by the city. The resolution carried and the sales tax was levied countywide.
The statutory method of distribution (Sec. 67-3052, T.C.A.) of the county-wide sales tax revenues will, at the end of the fiscal year, mean a sixteen to twenty thousand dollar reduction in Lenoir City’s sales tax revenues. To prevent the expected revenue loss Lenoir City and several city residents brought suit against Loudon County in the Loudon Chancery Court.
The complainants’ major contentions were: (1) T.C.A. 67-3051 should be construed to mean that after the passage of a city ordinance calling for a sales tax referendum, the county wherein such city is located must within forty days call for a county-wide referendum or forfeit [324]*324its authority to thereafter levy a sales tax; (2) T.C.A. 67-3053 (b) deprives city residents of equal protection of the law; (3) the levy of the sale tax by London County unconstitutionally impaired the obligation of Lenoir City to retire its bonded indebtedness; (4) Loudon County was equitably' estopped from enacting the county-wide tax, thereby reducing Lenoir City’s revenue after the city had enacted the tax and pledged the revenue to retire its bonds.
• The Chancellor held that LOBA was constitutional but that the enactment of the .sales tax by Loudon County without the approval of the Lenoir City voters was an unconstitutional impairment of the city’s contract to use the sales tax revenues to retire its bonds. The Chancellor ordered that Lenoir City should continue to receive all the revenues produced by the sales tax within its borders and that the revenues from the tax on sales made within Loudon County but outside Lenoir City should go to the county government. Loudon County appealed.
The opinion of this Court is that although the Chancellor is correct about the constitutionality of the LOBA, his holding that the enactment of the sales tax by Loudon County unconstitutionally impaired a contract of Lenoir City is clearly erroneous. Likewise, the method of dis-' tribution-ordered by the Chancellor is patently contrary to the language of T.C.A. 67-3052.
Pour issues- now appear in this appeal. Firstly, what is the proper construction of T.C.A. 67-3051? The appellee, Lenoir City, contends that the statute means that the passage of a city ordinance levying a sales tax subject to. a referendum • perpetually bars the county wherein'-'such city is located from levying a county sales [325]*325tax unless within forty days after the enactment of the city ordinance the county court calls for a county-wide sales tax referendum. The appellee’s contention is based upon an alleged implication contained in the last sentence of T.C.A. 67-3051:
“If the tax levied [within the forty day suspension period] by a quarterly county court is finally determined to he nonoperative, such action shall not preclude subsequent action by the county to adopt the tax * * V’
The appellees argue that the foregoing sentence implies that after a city ordinance providing for a sales tax referendum has been enacted that a county can preserve its authority to levy a sales tax at some future time only by calling for a referendum within forty days of the passage of the city ordinance.
This Court finds no such implication in the last sentence of T.C.A. 67-3051. The sentence should not be read to mean that the county, when faced with a city ordinance calling for a sales tax referendum, must resolve within forty days to hold a referendum on a county-wide tax or forfeit its authority to do so. Correctly interpreted, the sentence in question merely means that if the county does call a referendum within the forty day suspension period and the referendum fails, the referendum’s failure does not preclude imposition of the tax at a future date.
The Legislature did not intend T.C.A. 67-3051 to restrict a county’s freedom to determine the appropriate time for levying a county sales tax. The statute empowers both cities and counties to adopt a local sales tax and details the procedure for levying the tax. If a city acts first, its ordinance calling a sales tax referendum is [326]*326automatically suspended for forty days to allow the county court an opportunity to call a county-wide referendum. The forty day suspension period is not designed to force the county to act immediately or not at all hut to offer the county an opportunity to initiate the tax. If the county court, within the forty days resolves to hold a county-wide referendum and the electorate adopts the sales tax the city’s ordinance is rendered null and the tax will be effective county-wide.
The city sales tax referendum will be held pursuant to the ordinance if the county court does not, within forty days of the passage of the city ordinance, call a countywide sales tax referendum or if a county-wide referendum is called within the forty days but fails. Whether the sales tax becomes effective within a city has no effect on the authority of the county court to subsequently levy a county sales tax subject to a referendum but it does determine who will be eligible to vote in a later referendum on the county-wide sales tax question.
T.C.A. 67-3053 classifies the persons eligible to vote in the sales tax referendum according to the circumstances existing at the time of the referendum. Section (a) of the statute applies to a referendum held by a city or by a county when the referendum is called before passage of a city ordinance calling for a referendum or within the forty day suspension period. All qualified voters residing within the city would be entitled to vote in the city referendum. A referendum called by a county court, either before passage of a city ordinance levying the sales tax subject to a referendum or within the forty day suspension period following such city action, would be open to all voters of the county including residents of the city.
[327]*327T.C.A. 67-3053 (b) applies only when a county court calls a referendum for a county-wide sales tax to be assessed at tbe same rate as a sales tax previously adopted by a city within that county. When this situation occurs only voters residing in the county outside the corporate limits of the city having the tax may vote.
The second issue is that the constitutionality of T.C.A. 67-3053 (b) which provides that in a referendum on the issue of a county-wide sales tax, held after a city within the county has adopted a sales tax, only voters of the county residing outside the city may vote. The appellees argue that restriction of the franchise to county voters residing outside a city with a sales tax denies the city residents equal protection of the law because tax revenues are diverted from the city without the approval of the city voters. T.C.A. 67-3057 (b) is not a denial of equal protection to city residents. Apparently the Legislature felt that the city voters could not complain since they had already voted for the identical tax at an identical rate on themselves. This provision was apparently enacted to stop short of extending to any city a vested interest in the revenue thus provided.
A city sales tax is a tax not only on city residents but on all persons purchasing goods and services within the city. By enacting a city sales tax the city voters exact a tax from each person who buys within the city even though that person may reside outside the city and have had no opportunity to vote on the tax question. Thus the money of county residents purchasing within the city is taken by means of a sales tax to which he is subjected without his consent. T.C.A. 67-3053 (b) merely gives to the county voters the same power that section (a) of the same statute gives to city voters.
[328]*328 Finally, the issues of unconstitutional impairment of contract and equitable estoppel may be consolidated for- disposition. The Loudon County Court resolution levying a sales tax subject to a referendum of the county voters even though subsequent to Lenoir City’s issuance of bonds and pledge' of the sales tax revenues was not an impairment of a contract nor was the county court equitably estopped from taking such action. Lenoir City’s bonded indebtedness was incurred with knowledge that the city’s authority to collect the local sales tax was derived solely from the LORA. According to our interpretation of the statute Loudon County always possessed the statutory right to levy the tax countywide.
We hold that a sales tax is effective throughout Lou-don County. The tax revenue must be distributed according. to the clear language of T.C.A. 67-3052. The decree below is accordingly reversed and the costs are to be .taxed to the city.