A second income on Second Life

According to Miller, some things are pretty clear. "The income tax already applies to income that is removed from virtual economies," he writes in an e-mail – as in when an SL user converts lindens back into US dollars. But the subject of taxing assets inside SL is more controversial, he says. "Based on our initial assessment of virtual economies ... virtual worlds need greater clarification, not additional taxation," he writes. "Governments have a hand in regulating many aspects of physical economies to one degree or another, while the government's presence in virtual worlds is relatively minor."

Some SL businesses already may be operating outside current law. Casino gambling and sports betting are pervasive in SL. The fact that bets are made in lindens, not dollars, won't shield gamblers from possible prosecution under federal laws banning Internet gambling, says Jaclyn Lesch, a spokeswoman for the US Justice Department. "Regardless of how one pays for the bet, it is still a bet if it involves something of value. While not a credit card or cash, [virtual currencies] would still be a thing of value" especially considering the fact that they are later redeemed for cash.

As for Linden Lab, the company claims that it is not responsible for illegal acts on the part of users, just as Internet service providers like AOL aren't responsible for actions committed by their users.

"Second Life is a service, a platform, much like the Internet," says Catherine Smith, director of marketing for Linden Lab. "As with the Internet, users are responsible for ensuring that their activities fall within the bounds of the law within their local jurisdiction," She points to a "terms of service" statement that SL residents must accept, which prohibits any action that violates a law or regulation.

Aside from staying on the right side of the law, SL entrepreneurs must also face up to the possibility that their very world could end suddenly. If Linden Lab were to close up shop, the entire SL economy would disappear in an eye-blink. Even if Linden thrives, SL can sometimes be an unstable place to operate a business. Around New Year's, the system was plagued with numerous technical failures that took the world down for hours at a time. Digital vandals have been running rampant on SL, crashing large regions of the system with self-replicating pests.

Columbia is philosophical about the future. "We are dependent on the success of Linden Lab." he says. "I really do think we are digital pioneers in this world, and that there are a lot of things to work through. But SL or some form of a 3-D world will keep going because it really is a very unique and enabling place for many people. Whether a business can be maintained throughout the years, or even one platform of a 3-D world, is something I think can be done, but it certainly won't be easy."

For those considering life as a virtual entrepreneur on Second Life, the first step is to open an SL account. Basic ones are free, but if you plan to conduct any form of transactions, real money is involved.

One of the major expenses in SL is land. Those who want to buy "mainland" land, must upgrade to a premium account ($9.95 per month) and purchase the land itself, which can be quite pricey.

Currently, one square meter of mainland land can be had for about 12 lindens – the website's virtual currency. A typical 512-square-meter plot costs about 6,000 lindens, the equivalent of $22, based on the current exchange rate of 275 lindens to the dollar.

There is also a monthly "tier" charge, depending on how much land you own. The fee ranges from $5 for the lowest tier to as much as $195 per month for an entire region.

Users can also lease land on a private island, which doesn't require a premium account, but does require monthly rent payments to the island owner.

Once a business gets going, a businessperson can use the lindens they earn to fund in-game expenses.

Of course, they can also convert their lindens back into dollars (for a 3 percent service fee paid to site-creator Linden Lab).

Apart from the sale of "manufactured" goods, people also earn lindens by providing services, which can range from serving as staff in stores to working in the thriving escort industry, a polite term for virtual prostitution.

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