Nonemployer Statistics

Introduction

PURPOSE AND USE OF NONEMPLOYER STATISTICS

Nonemployer Statistics is an annual series that provides subnational economic data by industry for businesses that have no paid employees and are subject to federal income tax. The series is useful for studying the economic activity of small businesses at various geographic levels. Businesses use the data for analyzing market potential, measuring the effectiveness of sales and advertising programs, and developing budgets. Government agencies use the data for administration and planning.

Nonemployer Statistics includes most industries covered by the Economic Census. The series includes the agriculture, forestry, fishing and hunting industry with the exception of crop and animal production. The agriculture, forestry, fishing and hunting sector are not covered in other Census Bureau economic programs, including the Economic Census. Nonemployers are typically self-employed individuals operating very small businesses, which may or may not be the owner's principal source of income. Although nonemployers constitute a large part of the business universe in terms of the number of firms, they contribute a relatively small portion of the overall sales and receipts data. Tax-exempt businesses are excluded from the Nonemployer Statistics tabulations.

Nonemployer Statistics was first released as an annual series in 1998. Between 1972 and 1997, Nonemployer Statistics were released every 5 years for selected industries in conjunction with the Economic Census publications. Prior to 1972, the Census Bureau did not publish Nonemployer Statistics. Comparability of data over time may be affected by definitional changes for firms, activity status, industrial classifications, and processing methodology. For more details on these changes, see the section Comparability With Other Data, below. The 2002 Nonemployer Statistics is part of the 2002 Economic Census Core Business Statistics Series.

SOURCES OF DATA

Nonemployer Statistics data originate from administrative records of the Internal Revenue Service (IRS). Data are primarily comprised of sole proprietorship businesses filing IRS Form 1040, Schedule C, although some of the data is derived from filers of partnership and corporation tax returns that report no paid employees. These data undergo complex processing, editing, and analytical review at the Census Bureau to distinguish nonemployers from employers, correct and complete data items, and form the final nonemployer universe.

INDUSTRY CLASSIFICATIONS

The Nonemployer Statistics is published based on the 2007 North American Industry Classification System (NAICS). Detailed information about NAICS, including classification changes from 2002 to 2007, is available at http://www.census.gov/naics.

The Nonemployer Statistics series includes the following NAICS sectors:

Sector	Description
11(pt)	Agricultural Support, Forestry, Fishing, and Hunting
21	Mining
22	Utilities
23	Construction
31-33	Manufacturing
42	Wholesale Trade
44-45	Retail Trade
48-49	Transportation and Warehousing
51	Information
52	Finance and Insurance
53	Real Estate and Rental and Leasing
54	Professional, Scientific, and Technical Services
56	Administrative and Support and Waste Management and Remediation Services
61	Educational Services
62	Health Care and Social Assistance
71	Arts, Entertainment, and Recreation
72	Accommodation and Foodservices
81	Other Services (except Public Administration)

The following NAICS industries are excluded from Nonemployer Statistics:

• Crop Production (NAICS subsector 111)
• Animal Production (NAICS subsector 112)
• Investment Funds, Trusts, and Other Financial Vehicles (NAICS subsector 525)
• Management of Companies and Enterprises (NAICS sector 55)

Additionally, firms coded to the NAICS industries below are assumed to be misclassified, and are reclassified as follows:

If coded to:	Reclassified as:
New Car Dealers (NAICS industry 44111)	Used Car Dealers (NAICS industry 44112)
Department Stores (NAICS industry group 4521)	General Merchandise Stores (NAICS subsector 452)
Rail Transportation (NAICS industry 48211)	Support Activities for Transportation (NAICS subsector 488)
Hospitals (NAICS subsector 622)	Other Ambulatory Health Care Services (NAICS industry group 6219)
Oil and Gas Extraction (NAICS industry group 2111) in areas without oil and gas production	Other Financial Investment Activities (NAICS industry group 5239)

Sources for assigning Nonemployer Statistics industry classifications are the Social Security Administration, the Internal Revenue Service (IRS), and the Bureau of Labor Statistics. Industry classifications derived from the IRS are self-classified by tax filers.

The industry titles used in this series are the short NAICS titles. Information on NAICS and recent changes are at http://www.census.gov/naics. Nonemployer Statistics are limited to approximately 300 industries that are available through administrative-record sources, and are common to all three legal forms of organization applicable to nonemployer businesses. Because of this, data for nonemployers generally are provided at broader levels of industry detail than data for employers.

For those nonemployer businesses that were unclassified, NAICS classifications were imputed by assigning the code of a nonemployer business with comparable receipts located in the same county. For more information, refer to Coverage and Methodology.

GEOGRAPHIC CLASSIFICATION

The Nonemployer Statistics data series provides summary tabulations for the United States, each state, the District of Columbia, each county (and county equivalent), and metropolitan areas.

Most geography codes are derived from the business owner`s mailing address identified from administrative records. Because the owner's mailing address may not be the same as the physical location of the business, the resulting geography codes do not always represent where business is actually conducted.

The nonemployer tabulations exclude records with invalid, foreign, or military geographic locations. The independent cities in Virginia and the cities of Baltimore, MD; Carson City, NV; and St. Louis, MO; are treated as separate counties. Puerto Rico and Outlying Areas are not included in the nonemployer tabulations.

LEGAL FORM OF ORGANIZATION

The legal form of organization for nonemployer businesses is derived from administrative record sources. Nonemployer Statistics presents U.S.-level data by the following three legal forms of organization:

• Individual proprietorships (also referred to as "sole proprietorships")
• Partnerships
• Corporations

COMPARABILITY WITH OTHER DATA

The comparability of data with previous Nonemployer Statistics series may be affected by the following:

• Change in NAICS industries within Sectors 23, 42, 44-45, and 51, starting with 2002.
• The change from SIC to NAICS codes in 1997.
• The change to imputing industry classifications (see "Industry Classifications" section, above) for unclassified nonemployer businesses. Prior to 1997, unclassified businesses were excluded from the nonemployer tabulations.
• The inclusion of all industry sectors, except as noted in the "Industry Classifications" section, above. Prior to 1997, previous nonemployer tabulations covered businesses in the Services, Retail, Finance, Insurance, Real Estate, Transportation, Communications, Utilities, and Construction sectors.
• The change to providing county- and metropolitan area-level data for all industry sectors in 1997.

RELIABILITY OF THE DATA

The Nonemployer data are subject to nonsampling errors such as industry misclassification, as well as errors of response, nonreporting and coverage. The IRS Tax Reporting Relief program allowed taxpayers in hurricane affected regions additional time in filing tax returns. The 2004 and 2005 Nonemployer totals may be low due to late tax reporting in hurricane impacted counties/regions.

PROTECTION OF CONFIDENTIAL DATA FROM DISCLOSURE

In accordance with U.S. Code, Title 13, Section 9, no data are published that would disclose the operations of an individual business. Because the preponderance of Nonemployer Statistics data items originate with the IRS, we adhere to both Census Bureau and IRS disclosure guidelines. For tables at all levels of geography (U.S., state, county, metropolitan area) we publish the number of firms and receipts in a data cell only if it contains three or more nonemployer businesses. In tables based on data from reference year 2004 or earlier, cell suppression was used to protect data confidentiality for those cells that had a value based largely on contributions from one or two firms. Beginning with reference year 2005, values for each firm are perturbed prior to table creation by generating a random noise multiplier that is chosen independently for each company. This perturbation is used to protect firm and company values from disclosure. This protection is accomplished in a manner that causes the vast majority of cell values to be perturbed by at most a few percentage points. When the number of firms for a cell is only one or two, the cell value is suppressed, and these suppressions are assigned a flag of "D".

If more than 40 percent of either receipts or firms in a published data cell are from firms with an imputed industry classification, we suppress both items because the data do not meet publication standards. These suppressions, as well as any other data cells not meeting publication standards, are assigned a flag of "S." The "S" flag indicates there are firms engaged in economic activity for that industry level and the suppressed data are included in higher-level totals.

Noise Infusion

Starting in 2005, Nonemployer Statistics adopted the Noise Infusion method of data protection. Noise infusion is a method of disclosure avoidance in which values for each firm are perturbed prior to table creation by applying a random noise multiplier to the magnitude data (i.e.receipts) for each business. Disclosure protection is accomplished in a manner that results in a relatively small change in the vast majority of cell values. For the 2007 Nonemployer Statistics, each published cell value has an associated noise flag, indicating the relative amount of distortion in the cell value resulting from the perturbation of the data for the contributors to the cell. The flag for ‘low noise’ (G) indicates the cell value was changed by less than 2 percent with the application of noise, and the flag for ‘moderate noise’ (H) indicates the value was changed by 2 percent or more but less than 5 percent. Cells that have been changed by 5 percent or more are suppressed from the published tables. Additionally, other cells in the table may be suppressed for additional protection from disclosure or because the quality of the data does not meet publication standards. Though some of these suppressed cells may be derived by subtraction, the results are not official and may differ substantially from the true estimate.

For an introduction to the noise confidentiality protection method, see Using Noise for Disclosure Limitation of Establishment Tabular Data by Timothy Evans, Laura Zayatz, John Slanta in the Journal of Official Statistics (1998). For specific information about the application of this method to Nonemployer Statistics, contact the Economic Planning and Coordination Division, Register Analysis Branch listed below.

DATA PRODUCTS

Types of products

Nonemployer Statistics data are available in hypertext tables, in the American FactFinder system, and in downloadable data files, all accessible at the Nonemployer Statistics main page.

• The hypertext tables provide data users a quick and easy interface to obtain the number of businesses and their receipts for the U.S., states, counties and metro areas.
• American FactFinder provides data users with tools to filter the data set by industry and geography, and to sort and reformat the data. Results of queries can be downloaded for further manipulation, subject to certain file-size limitations.
• Downloadable files in comma-separated-variable (csv) format allow the user to retrieve larger files than AFF will download.

The Historical Data page also links to data for 2004 and earlier years on CD-ROM or DVD-ROM and in portable document format, products discontinued thereafter.

Types of Tables

Two tabulations are presented.

• Nonemployer Statistics by Geography presents the number of nonemployer firms and their receipts by NAICS industry for the U.S., states, counties, and metropolitan and micropolitan areas
• Nonemployer Statistics by Legal Form of Organization (LFO) presents firms and receipts by industry for the total and three categories of legal form of organization: corporations, individual proprietorships, and partnerships. Data are limited to the U.S. and states

Only those NAICS classifications with economic activity are displayed.

Special tabulations

Certain special tabulations can be created at the user's expense. To discuss feasibility and cost, contact the U.S. Census Bureau, Economic Planning and Coordination Division, Register Analysis Branch, Washington, DC 20233; telephone: 301-763-2580; e-mail: epcd.nonemployer.statistics@census.gov.

ABBREVIATIONS AND SYMBOLS

The following abbreviations and symbols are used in this data series:

D	Withheld to avoid disclosing data for individual businesses; data are included in broader industry totals.
S	Withheld to avoid releasing data that do not meet publication standards; data are included in broader industry totals.
G	Low noise applied to cell value
H	Medium noise applied to cell value
NAICS	North American Industry Classification System
PMSA	Primary Metropolitan Statistical Area
MSA	Consolidated Metropolitan Statistical Area
MSA	Metropolitan Statistical Area