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?)

Diving Deeper into NAICS Code Structure

The official NAICS structure is organized as follows:

• 2-Digit Codes: Represent the broad sectors of the U.S. economy, such as Manufacturing or Health Care.
• 3-Digit Codes: Further refine these sectors into subsectors, capturing a more specific grouping of related industries.
• 4-Digit Codes: Break down subsectors into industry groups, offering additional clarity.
• 5-Digit Codes: Provide deeper insight into industry clusters by splitting groups into narrower categories.
• 6-Digit Codes: Represent the most detailed level of classification officially maintained by the U.S. Census Bureau, pinpointing a specific industry or business activity.
• 8-Digit Codes: Extend beyond the official structure to provide a marketing-level detail for targeting specific niches. These codes allow for more than 10,000 unique classifications, aiding in precise business list targeting and refined marketing strategies. Explore the possibilities with extended codes: Extended NAICS Code Lookup Directory.

This hierarchical structure allows for detailed analysis and understanding of economic trends and industry performance. For more information on the official NAICS structure, visit the U.S. Census NAICS page.

What is a Primary NAICS Code?

Each company has a primary NAICS code determined by 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.

Extending Beyond: Marketing Level NAICS Codes

While the first 6 digits of NAICS codes are utilized for official statistics by federal agencies, many businesses and market analysts benefit from a more granular breakdown for strategic purposes. To meet this need, organizations extend these codes to 8-digits, creating what are known as Marketing Level NAICS codes. These extended codes are designed specifically for marketing and strategic business applications:

• Enhanced Segmentation: By including two extra digits, these codes can capture subtle differences within an industry, such as distinguishing between niche software specialties.
• Strategic Business Use: These granular codes refine market research and perform nuanced competitor analysis, supporting targeted marketing strategies.
• Tailored Applications: Marketing Level codes provide businesses with the flexibility to conduct detailed industry analysis and enhance their internal analytics and decision-making.

These Marketing Level codes are particularly useful in rapidly evolving industries, allowing companies to construct highly targeted business lists and marketing strategies, enabling a much more refined level of market engagement. Discover how these codes can transform your targeting strategy: Extended NAICS Code Lookup Directory.

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 & Tree Nut Farming

Industry
(5th Level)

• 11133 - Non-citrus Fruit & Tree Nut Farming

U.S. Industry
(Govt. Level)

• 111331 - Apple Orchards

Extended
(Marketing Level)

• 111331-02 - Apple Products

NAICS History and Evolution

The North American Industry Classification System (NAICS) was introduced to modernize the way industries are classified in North America, replacing the outdated Standard Industrial Classification (SIC) system. Developed collaboratively by the United States, Canada, and Mexico, NAICS provides a unified framework that reflects the evolving economic landscape. The system facilitates detailed economic analysis and supports a wide range of applications, from policy development to market research. NAICS is characterized by its hierarchical structure, which allows for precise categorization of economic activities, thereby enhancing the ability of businesses and governments to analyze trends and make informed decisions. Regular updates, scheduled every five years, ensure that NAICS remains relevant and adaptable to changes in industry dynamics and technological advancements.

OMB – Office of Management and Budget
SIC – Standard Industrial Classification
NAICS – North American Industrial Classification System
NAFTA – North American Free Trade Agreement

NAICS Codes in Business Strategy

NAICS 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, 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.
• Customer Analysis: By appending NAICS codes to their customer databases, businesses can analyze the industries their clients operate in, guiding future marketing campaigns. See: NAICS Code Append
• Tax Incentives: Some state governments offer tax incentives based on specific NAICS industry classifications.
• Competitive Analysis: NAICS codes assist businesses in identifying competitors within their industry.

The Government's Use of NAICS Codes

NAICS 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, ensuring 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.
• Tax Administration: The IRS uses NAICS codes to administer the Internal Revenue Code effectively.

Strategic Insights with NAICS Codes

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. These 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 and Beyond

The United States Office of Management and Budget has released the publication of the 2022 NAICS United States Manual in January 2022, marking the latest update in a series of revisions that reflect the evolving economic landscape. For detailed updates and historical revisions, you can explore the 2022 NAICS Updates at the U.S. Census Bureau.

• NAICS 2022 Information Page

For an in-depth exploration of NAICS codes and their business applications, visit our NAICS 2022 Information Page.