Provisions added to the bill in the House would require Amazon to start online sales tax collection in July, six months earlier than under a deal that former Gov. Mitch Daniels brokered with the company last year.
Senate majority leader Brandt Hershman, R-Lafayette, said Republican senators remain concerned that Indiana's reputation with businesses would suffer if the Legislature interfered with the Amazon agreement.
"Does that six months of additional tax collection outweigh the damage to the credibility of the state in giving its word?" Hershman said. "I really don't think so."
The bill's supporters maintain the Amazon deal is unfair to traditional retailers who must charge sales taxes.
The current state policy dates to a 2007 deal with the Seattle-based Amazon, which agreed to open its first warehouse in Indiana with the promise that officials wouldn't push for online sales tax collection. Amazon now has five distribution centers in Indiana, although it hasn't said how many people it employs.
The bill would apply to online retailers with an office or warehouse in the state that generate at least $10,000 in annual sales to Hoosier customers. Current state law already requires sales tax collection for online sales by retailers, such as Wal-Mart, with Indiana stores.
State officials project Indiana will see a $57 million a year boost in revenue just from Amazon sales, according to the nonpartisan Legislative Services Agency. A study completed last year by the Indiana Fiscal Policy Institute and Ball State University researchers estimates the state loses up to $114 million a year in uncollected sales taxes on internet purchases.
Sen. Greg Walker, R-Columbus, said he was willing to agree to the online sales tax provisions that the House added to a bill he sponsored on other tax matters. Walker said he thought the state should be consistent how it treats online-only retailers and online sales by companies with stores in the state.
Walker withdrew his consent for the House version of the bill Thursday after a private meeting of Republicans who hold a 37-13 Senate majority.
"Most are concerned that we don't project a bad image going forward — that we do make business negotiations count," he said.
The Associated Press left a telephone message Thursday seeking comment from Amazon officials.
Republican Gov. Mike Pence, who took office in January, told reporters recently that he supported the Daniels administration's agreement with Amazon and didn't want to break it.
The Republican-controlled House voted 73-19 in favor of the bill this week, despite similar arguments by opponents over breaking the Amazon deal.
Rep. Dan Leonard, R-Huntington, said he still hoped a compromise could be reached over the tax collection before the expected end of the legislative session next week. He said believes the 7 percent advantage costs small businesses like his furniture store thousands of dollars in sales each year.
Leonard said the Legislature should act on the issue since it wasn't included in negotiations giving Amazon an exception from sales tax collection.
"I just think it is only fair for other retailers who are trying to compete," he said.