What is a NAICS Code?
The North American Industry Classification System (NAICS) is used by businesses and governments to classify and measure economic activity in the United States, Canada, and Mexico. NAICS is 6-digit code system that is currently the standard used by federal statistical agencies in classifying establishments (individual business locations). NAICS organizes establishments into industries according to the similarity in the processes used to produce goods or services. (See: What is a SIC Code?)
NAICS codes array the economy into 20 sectors, which are separated into 99 3-digit subsectors, which are divided into 311 4-digit industry groups, which are further subdivided into 709 5-digit industries, and finally disaggregated into 1057 6-digit U.S. industries.
What is a Primary NAICS Code?
Each and every company will have a primary NAICS code. This number indicates a company’s primary line of business. What determines a company’s primary NAICS code is the code definition that generates the highest revenue for that company at a specific location in the past year.
How to Read a NAICS Code
The first two digits designate the largest business sector, the third digit designates the subsector, the fourth digit designates the industry group, and the fifth digit designates particular industries. The last digit designates national industries. Please see example below:
11 - Agriculture, Forestry, Fishing, Hunting
111 - Crop Production
1113 - Fruit and Tree Nut Farming
11133 - Non-citrus Fruit and Tree Nut Farming
111331 - Apple Orchards
Timeline of NAICS
OMB – Office of Management and Budget
SIC – Standard Industrial Classification
NAICS – North American Industrial Classification System
NAFTA – North American Free Trade Agreement
How do Businesses use NAICS codes?
- Companies use NAICS codes to identify customers by industry code (See: NAICS business lists)
- Identifying government contracts by their NAICS description
- Companies append NAICS codes to their customer list to determine what industries their customers operate in. For future marketing campaigns, companies know which industries to further market to (See: NAICS Code Append)
- Your NAICS code is often asked for on various applications and forms
- State governments may offer tax incentives to businesses based on specified NAICS industries
- If you plan to solicit work from a governmental body, you will be asked for your NAICS code
- NAICS codes should be updated in relation to changes/modification in business revenue
- To identify competitors, public and private
- State and Federal Registrations
- Tax Purposes
How does the Government use NAICS codes?
- NAICS codes are used in auditing purposes by comparing ratios of companies in a similar industry
- To facilitate the collection, presentation, and analysis of data
- The Department of Revenue uses the NAICS code for legislative issues
- To promote uniformity and comparability in the presentation of statistical data collected by various agencies of the federal government, state agencies, and private organizations
- To facilitate the administration of the Internal Revenue Code for the Internal Revenue Service - (IRS) business activity codes
- The Department of Revenue uses the code to inform taxpayers within a certain industry of law changes that may affect them
- NAICS codes may be necessary requirements for government contracting, teaming, and subcontracting
Why You need to use NAICS Codes?
NAICS codes have been defined by the Governments of the United States, Mexico, and Canada as the most exact industry classification coding system. SICCODE provides companies the ability to register by NAICS codes. Identify your current customers by their NAICS code and find new clients within the same or similar industries. NAICS codes are important when seeking eligibility for government contracts.
Helpful NAICS Code Tools
- NAICS Code Directory & Lookup - Look up and identify NAICS Codes by Keyword or code number
- NAICS-to-SIC Cross Reference - Convert NAICS Codes to SIC Codes
- SIC-to-NAICS Cross Reference - Convert SIC Codes to NAICS Codes
The United States Office of Management and Budget has released the publication of the 2017 NAICS United States Manual in January 2017.