The North American Industry Classification System (NAICS) is a classification system to group businesses into similar industries for the primary purpose of tracking economic activity. NAICS is a way for U.S., Mexico, and Canada governmental agencies such as the U.S. Census Bureau to have standardized data to provide statistical data from economic activity.
The NAICS code is a number between 2-6 digits. The shorter 2-digit codes are the broadly defined industry and become more specific as more numbers are added.
Within NAICS, 20 primary two-digit NAICS code classifications are commonly referred to as sectors. For example, all Construction related businesses are under the NAICS two-digit code of 23.
After the sectors, there are 96 subcategories and 317 industry groups. You can identify subcategories by their three-digit codes and industries by their four-digit codes. You may be wondering, “What is my NAICS code?” To properly determine your primary NAICS code(s), you must work down the classification scheme to identify the best fit for your business.
While it’s not uncommon for a business to have multiple codes, you will choose the NAICS closest to the primary business activity.
Besides tracking economic activity, some other uses of NAICS codes include:
- Helping businesses find potential customers that operate in specific industries
- Identifying whether a business can compete for government contracts
- Filling out tax forms
- Comparing financial performance against businesses in the same industry.
- Obtaining certifications – Various state and government agencies such as the Small Business Administration and Department of Veteran’s Affairs requires businesses to be under a certain revenue to qualify for certifications. These certifications allow smaller businesses to compete for government contracts that are only reserved for small businesses.
How to do a NAICS lookup
- Visit U.S. Census Bureau’s website
- Use the field for “2017 NAICS Search” Enter what your business does. For example, “Restaurant,” “Auto Repair,” “Grooming,” Etc., then click “Submit.” In this example, we searched for a restaurant.
- If you enter something too specific, no results will come in. If that happens, try something more generic. Instead of “Pizza Restaurant,” try “Restaurant.” When you see a NAICS title that is closest to your business, click on the result. If you aren’t sure, click on the listings to look at the overview to see which one is closest. In this example, we looked at “Restaurants, full service.”
- Clicking our “Restaurants, full service” example, we are able to get more details about that industry. The full results give a short industry overview and the types of businesses included in that particular code.
What is the difference between a NAICS code and SIC code?
The North American Industry Classification System (NAICS) code started in 1997 and replaced the Standard Industrial Classification (SIC) system.
SIC codes primarily focused on manufacturing and were kept up-to-date with service-based and high-tech businesses. Canada and Mexico, along with the U.S., adopted the NAICS to better analyze and facilitate trade through the North American Free Trade Agreement (NAFTA).
What are the NAICS Sectors?
11: Agriculture, 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, Rental & Leasing
54: Professional, Scientific, and Technical Services
55: Management of Companies and Enterprises
56: Administrative & Support & Waste
61: Educational Services
62: Health Care & Social Assistance
71: Arts, Entertainment, & Recreation
72: Accommodation & Food Services
81: Other Services (Except Public Administration)
92: Public Administration
99: Unclassified
Do you have to register with the NAICS association?
No registration is necessary – or an option. The NAICS code is used to describe what the business does.
Who assigns a NAICS code to a business?
There is no government agency that assigns, approves, or reviews NAICS codes. A NAICS code is assigned by the business owner to describe the primary revenue-generating activity of the company.
Can you have more than one primary NAICS code?
A business will only have one primary NAICS code, which generally corresponds with the activity that generates the highest revenue. A business that has multiple activities or lines of business can designate secondary NAICS codes.
Where do you find the NAICS code on a tax return?
The IRS requires the NAICS code to be entered when filing a tax return. The NAICS number will usually be found on the upper right side of the tax return.
