What is a NAICS Code?
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 analyze 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.
How to do a NAICS lookup
- 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 will search for a restaurant, and a list of primary business activities containing the restaurant keyword and the corresponding NAICS codes will appear. Choose the category that most closely corresponds to your primary business activity, or refine your search to obtain other choices.
- If you entered 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”.
- If you entered a keyword that was too specific, no results would 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 can 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 a 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, Mexico, and 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
42: Wholesale Trade
44-45: Retail Trade
48-49: Transportation and Warehousing
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
Do sole proprietors have a NAICS code?
NAICS codes are for businesses and not specifically for business entities.
How can I find my NAICS code on my tax return?
When filling out a federal tax return, the NAICS is typically located at the top of the form.
What if I use the wrong NAICS code?
NAICS codes are self-assigned by the business and as such, there is no central agency to change a code. assigning NAICS codes to businesses, numbers are self-assigned or assigned by individual agencies based on data collected. The impact of an incorrect NAICS code can be severe if selling your products and services to the federal government, however, if changing with the IRS, you can enter a new number on your next year’s tax return.