They are merchants.
Definition of a merchant:
a trader, especially wholesale, in goods of a particular kind
Even the people who provide the free and cheaper items are merchants. Now you could have an argument about whether or not they are a valid business, However, many of them have impressive incomes from their Second Lives.
It is estimated that from the listing fees alone (10 linden per item which is approximately 4 cents US) Linden Lab will pull in over $20K USD a month. Thats a good chunk of change for doing...ummm... nothing but hosting a website. They bought out an existing site and did very little to improve or change it. In fact they made the color scheme rather unpleasant. It isn;t about the free stuff, it's about making more money and getting into bed with their "elite merchants" who are the top 5% sellers.
Let me ask you this, are you required to report and pay taxes on your earnings from posting here? Or from any other "liesure" internet activity? Yeah I thought not!