Clearly, e-commerce is here to stay and growing by the hour. International Data Corporation has projected that 46 million Americans will buy $16 billion worth of goods online annually by next year, and $54 billion by 2002. And now for the question you have been dying to ask -- how are these online enterprises being taxed?

Are Internet sales subject to sales tax at all? According to William Raabe, Director of Accounting Programs at Samford University School of Business, uncertainty about how to tax e-commerce has given Internet businesses an unfair advantage.

"Where is a Web page ‘present’ so that it is clear that a tax applies? Where the seller physically is? The buyer?" Raabe continued, "Courts and statutes have been slow to address this issue, to the detriment of ‘bricks and mortar’ businesses whose presence is obvious so that they cannot avoid the tax."

Last year, the Senate overwhelmingly approved the Internet Tax Freedom Act, which imposed a three-year moratorium on new Internet taxes. This act bars state or local governments from imposing new taxes on access to the Internet and data flowing over the Internet, and also prohibits any new e-commerce taxes.

Local legislators, though, are not all waiting for the end of the three-year moratorium. The National Association of Counties recently unanimously approved a resolution asking Congress to impose a sales tax on all online purchases.

Local governments estimate that $5 billion annually in tax revenue is already being lost to out-of-state mail order business, and with the rapid rise of e-commerce, this number will only increase. While there have been some rumblings of impatience in Congress, the federal government is urging local and state officials to respect the Internet Tax Freedom Act’s ban.

While the feds favor no additional taxes for now, state governments are grappling with the issue individually. Texas, for instance, taxes not only Internet access charges, but also the money collected when content providers sell online subscriptions, as well as the fees charged by Web developers for building sites. On the other hand, New York decreed that Internet access charges are not subject to state sales or telecommunications taxes. Currently nine states tax Internet services, and six states, including California, have moratoriums on Internet taxes.

There is another problem with Net taxes: the Internet crosses international borders as easily as it skips over state lines. President Clinton wants to turn the Internet into a free-trade zone. Japan agrees, but other countries have already indicated a willingness to regulate the Net. Getting international agreement on Net taxes may be the biggest hurdle yet to overcome.

E-business employees tend to work long hours for lower pay, hoping to strike it rich through stock options. What tax issues does this unusual arrangement create?

Under new legislation currently being debated in the House of Representatives, ordinary workers would be able to receive tax incentives to buy options on their company’s stock. But labor unions and Democratic lawmakers say the proposal needs to be revised to ensure that employers do not use the stock options to replace conventional retirement plans.

This legislation would allow employees of publicly traded companies to defer paying taxes until they sell the shares. Under current tax rules, employees have to pay taxes when they exercise the options to buy the shares.

Stock options largely used to be a perk reserved for top company executives. Options for employees became wildly popular in the past decade, however, as scores of high-tech companies began to include them in compensation packages to lure talented workers.

The new proposal will allow employees in some cases to pay taxes when they sell the shares at rates for long-term capital gains, rather than higher income tax rates. Companies that make the option available to employees will also get a tax deduction. The proposal also would prohibit companies from cutting workers or salaries as a condition of making the options available.

At a time when the classifieds are filled with positions offering stock options, and young Silicon Valley employees have become overnight millionaires from selling their soaring company stocks, some lawmakers want to make options more widely available to workers at "Old Economy" companies.

Proponents of the legislation say it would give receptionists, janitors or mailroom workers at a company the same chance as higher-paid employees to buy a house or send a child to college. It is well known that when employees own a large chunk of a company, it is less likely to close, move to another location or lay off workers.

Stock options can be structured to create capital gain income, or compensation income, thus subject to much lower tax rates. But some people think it is unfair.

William Raabe asked, "Why would we give an income tax break to those who have chosen to work in this field instead of others? Some entities cannot offer stock options by nature - universities, consulting firms, proprietorships - and why would we have a tax system that discriminates against the work that they do, which often is an integral cog in the high-tech process as well?"

With the endless economic opportunities available via e-commerce the question is not whether Uncle Sam will get a piece but when. Meanwhile, the issue continues to spark debate over taxes and compensation among a number of combatants: The White House, Congress, local governments, labor unions, proprietors, investors and even our international trading partners.

E-businesses will undoubtedly owe a debt to accounting professionals who closely monitor these issues, and help Internet companies navigate the ever-changing e-commerce tax landscape.