It can only work if you call the function from within a sub rather than a cell. Try running MAIN:
Sub MAIN()
MsgBox ClearDropList("Yes")
MsgBox Worksheets("Sheet1").Range("D7").Value
MsgBox ClearDropList("No")
MsgBox Worksheets("Sheet1").Range("D7").Value
End Sub
Function ClearDropList(check)
If check = "No" Then
Call clearTankList
ClearDropList = ""
End If
If check = "Yes" Then
ClearDropList = ""
End If
End Function
Sub clearTankList()
Worksheets("Sheet1").Range("D7").ClearContents
End Sub