What is a NAICS Code?

The North American Industry Classification System (NAICS) is a vital tool used by businesses and governments to classify and measure economic activity across the United States, Canada, and Mexico. This standardized 6-digit coding system is employed by federal statistical agencies to categorize establishments—individual business locations—based on their primary economic activities. NAICS organizes these establishments into distinct industries by examining the similarities in the processes used to produce goods or services. (See: What is a SIC Code?)
NAICS categorizes the economy into 20 broad sectors, which are further divided into 96 three-digit subsectors. These subsectors are then segmented into 308 four-digit industry groups, which are subsequently broken down into 689 five-digit industries, and finally disaggregated into 1,012 six-digit U.S. industries. This hierarchical structure allows for detailed analysis and understanding of economic trends and industry performance. 

What is a Primary NAICS Code?

Each and every company will have a primary NAICS code. This code is determined by identifying the code definition associated with the highest revenue generated by the company at a specific location over the past year. Understanding a company's primary NAICS code is essential for accurate classification, compliance, and strategic decision-making.

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

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:

Sector
(Top Level)

• 11 - Agriculture, Forestry, Fishing, Hunting

Subsector
(3rd Level)

• 111 - Crop Production

Industry Group
(4th Level)

• 1113 - Fruit and Tree Nut Farming

Industry
(5th Level)

• 11133 - Non-citrus Fruit and Tree Nut Farming

U.S. Industry
(Final Level)

• 111331 - Apple Orchards

NAICS History

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?

NAICS (North American Industry Classification System) codes serve as a crucial tool for businesses across various sectors. Here's how companies effectively leverage these codes:

• Market Identification
  Businesses use NAICS codes to categorize their customer base by industry. This classification helps in streamlining marketing efforts and identifying target markets. See: NAICS Business Lists
• Government Contracting
  Many government contracts are organized by NAICS codes. Companies can identify potential contracts and opportunities by referencing the relevant NAICS descriptions, ensuring they align their proposals with industry standards.
• Customer Analysis
  By appending NAICS codes to their customer databases, businesses can analyze the industries their clients operate in. This insight guides future marketing campaigns, allowing companies to tailor their strategies to specific sectors. See: NAICS Code Append
• Application Requirements
  NAICS codes are often required on various applications and forms, including business licenses, grants, and loans. Providing the correct code ensures compliance and facilitates smoother processing.
• Tax Incentives
  Some state governments offer tax incentives based on specific NAICS industry classifications. Businesses can leverage these codes to discover eligible opportunities that may enhance their financial standing.
• Government Solicitation
  When seeking contracts or proposals from governmental bodies, businesses must provide their NAICS code. This requirement helps verify that the company operates within the appropriate industry.
• Revenue Monitoring
  Companies should regularly update their NAICS codes to reflect any changes in business operations or revenue. Accurate classification is essential for compliance and strategic planning.
• Competitive Analysis
  NAICS codes assist businesses in identifying competitors within their industry, both in the public and private sectors. Understanding the competitive landscape is vital for strategic positioning.
• Regulatory Compliance
  Many state and federal registrations require the inclusion of NAICS codes. Ensuring accurate and current codes helps in maintaining regulatory compliance.
• Tax Reporting
  NAICS codes are used for tax purposes, allowing businesses to categorize their income and expenses accurately. This classification aids in fulfilling federal and state tax obligations.

How does the Government use NAICS codes?

NAICS (North American Industry Classification System) codes play a vital role in government operations and data analysis. Here are the primary ways in which government agencies utilize these industry classification codes:

• ​Auditing and Compliance
  NAICS codes are instrumental in auditing processes, allowing government agencies to compare financial ratios and performance metrics of companies within similar industries. This ensures compliance with industry standards and regulations.
• Data Collection and Analysis
  Government agencies use NAICS codes to facilitate the systematic collection, presentation, and analysis of data. This helps in understanding economic trends and industry performance across various sectors.
• Legislative Insights
  The Department of Revenue leverages NAICS codes to address legislative issues, providing essential data that informs policy decisions and legislative changes affecting specific industries.
• Statistical Uniformity
  To promote uniformity and comparability in statistical data presentation, various federal and state agencies, as well as private organizations, rely on NAICS codes. This standardization enhances the quality and reliability of economic data.
• Tax Administration
  The Internal Revenue Service (IRS) uses NAICS codes to administer the Internal Revenue Code effectively. Business activity codes derived from NAICS facilitate accurate tax classification and reporting for businesses.
• Taxpayer Communication
  The Department of Revenue employs NAICS codes to inform taxpayers within specific industries about legal changes that may impact their business operations. This proactive communication helps ensure compliance with evolving regulations.
• Government Contracting
  NAICS codes are essential requirements for government contracting, teaming, and subcontracting opportunities. Businesses must provide their NAICS codes when bidding for government contracts, ensuring alignment with industry-specific criteria.
• Resource Allocation
  Government agencies utilize NAICS codes to allocate resources effectively, ensuring that funding and support are directed toward industries that require assistance or development.

The Importance of Using NAICS Codes for Business Success

NAICS codes, established by the governments of the United States, Mexico, and Canada, represent the most precise industry classification coding system at the government level. SICCODE offers companies the ability to register using NAICS codes, enabling businesses to identify their current customers by their respective codes and discover new clients within the same or similar industries. Moreover, NAICS codes are crucial for businesses seeking eligibility for government contracts, as they ensure compliance with industry-specific requirements and facilitate access to valuable opportunities.

• SIC Codes vs. NAICS Codes

NAICS 2022

The United States Office of Management and Budget has released the publication of the 2022 NAICS United States Manual in January 2022.

• NAICS 2022 Information Page