How to use order by with union all in sql?

Not an OP direct response, but I thought I would jimmy in here responding to the the OP's ERROR messsage, which may point you in another direction entirely!

All these answers are referring to an overall ORDER BY once the record set has been retrieved and you sort the lot.

What if you want to ORDER BY each portion of the UNION independantly, and still have them "joined" in the same SELECT?

SELECT pass1.* FROM 
 (SELECT TOP 1000 tblA.ID, tblA.CustomerName 
  FROM TABLE_A AS tblA ORDER BY 2) AS pass1
UNION ALL 
SELECT pass2.* FROM 
  (SELECT TOP 1000 tblB.ID, tblB.CustomerName 
   FROM TABLE_B AS tblB ORDER BY 2) AS pass2

Note the TOP 1000 is an arbitary number. Use a big enough number to capture all of the data you require.

SELECT  * 
FROM 
        (
            SELECT * FROM TABLE_A 
            UNION ALL 
            SELECT * FROM TABLE_B
        ) dum
-- ORDER BY .....

but if you want to have all records from Table_A on the top of the result list, the you can add user define value which you can use for ordering,

SELECT  * 
FROM 
        (
            SELECT *, 1 sortby FROM TABLE_A 
            UNION ALL 
            SELECT *, 2 sortby FROM TABLE_B
        ) dum
ORDER   BY sortby 

You don't really need to have parenthesis. You can sort directly:

SELECT *, 1 AS RN FROM TABLE_A
UNION ALL 
SELECT *, 2 AS RN FROM TABLE_B
ORDER BY RN, COLUMN_1