The IRS released their 2016 tax data on sole proprietors.
The data covers business receipts, deductions, and net income reported by taxpayers on Schedule C of tax Form 1040.
This includes the vast majority of small businesses, including small businesses that report on a pass-through basis (LLC's, etc.).
In 2016 about 25.5 million sole proprietors reported about $1.422 trillion dollars in gross receipts.
As with prior years, sole proprietor spend on contract labor caught our eye.
As the chart below shows, U.S. sole proprietors spent about $56.8 billion on contract labor (freelancers, temps, etc.) in 2016, up from $34.4 billion in 2010.
This is an increase of 65% between 2010 and 2016.
Over the same period, spending on salaries and wages (meaning traditional employees) rose from $73.7 billion to $90.9 billion, an increase of 23%.
Way back in 2003, contract labor was only about 20% of the labor costs of sole proprietors. By 2010 it has risen to 31%. And in 2016 it reached 39%.
This is similar to the non-employee share of the workforce at large corporations, which has also increased substantially over the last two decades.
Expect to see the growing use of non-employee labor by firms big and small to continue.
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