"We need to have some flex with that fee amount," he said.
Oakes said the tax office has not decided if it needs to raise the rate to 5 percent, but he has not ruled out that option.
"That work is ongoing. It may be 2 percent, it may be 3, it may be 5," he said. "We want to do it efficiently and effectively. But part of doing efficiently is being good stewards of the taxpayers' dollar."
Discussion of the bill was short on the House side, but several senators expressed concerns about the legislation.
"I don't know why the Tax Department would need additional money or need any more money than it does now," said Sen. Bob Plymale, D-Wayne.
The bill would require the Tax Department to seek legislative approval for the fee it charges, but Plymale said he was worried the agency would issue an emergency rule and increase the fee. The rule would stay in effect until legislators could meet again to vote.
Plymale said at 5 percent, the Tax Department would take $200,000 a year from Huntington's municipal sales tax collections.
He said he urged Huntington Mayor Steve Williams to send a letter to Gov. Earl Ray Tomblin, urging him to keep the rate at 1 percent.
Sen. Evan Jenkins, D-Cabell, said he was worried the bill would cause "sticker shock" for Huntington.
"This would obviously dip into what Huntington is receiving now," he said.
In the first three months of 2013, the city of Huntington's collected $1,759,790 from its new sales tax. The Tax Department retained $17,776.
Sen. Brooks McCabe, D-Kanawha, cast a "nay" vote on the bill despite previously pledging his support for it.
McCabe said there was nothing suspicious about the amendment and agreed the Tax Department should be paid for its extra work, but he said the potential for a 5 percent fee is "way too high."
"I just don't think somebody put a pencil to it. Five percent for that service is excessive," he said.
McCabe said he was confident the Legislature would never approve a 5 percent fee if the Tax Department requested one.