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NAICS Codes 101

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NAICS Codes 101

By ChristineL
Published: March 23, 2010

As a small business owner, you probably have heard of the NAICS code, but may not know what it means and what it is used for. Here is a quick overview of the North American Industry Classification System (NAICS) and how to obtain your busines;s NAICS code.

What is NAICS?

NAICS stands for the North American Industry Classification System, a standard system used by business and government to classify business establishments into 20 industries, according to their economic activity. The US government developed NAICS to collect, analyze, and publish data about the economy. Canada and Mexico have also agreed to use NAICS as a standard across North America.

NAICS replaced the now-obsolete Standard Industrial Classification (SIC) system in 1997. The US government updates NAICS every five years to reflect changes in business and industry classifications. NAICS 2007 is the most recent version and the next NAICS will launch in January 2012.

What Does a NAICS Code Signify?

A NAICS code consists of six digits. The first two digits indicate economic sector. The third indicates industry subsector. The fourth refers to industry group, and the fifth refers to industry. The sixth digit specifies an industry that is specific to the US, Canada, or Mexico.

For example, US catering businesses would use NAICS code 722320. Here is the breakdown:

  • 72 stands for Accommodation and Food Services.
  • 722 stands for Food Services and Drinking Places.
  • 7223 stands for Special Food Services.
  • 72232 stands for Caterers.
  • 722320 stands for Caterers in the US

Read more about the NAICS numbering system at the US Census Bureau.

Should I Get a NAICS Code?

Some federal and state agencies require businesses to have a NAICS code for administrative, contracting, and tax purposes. Some state governments offer tax incentives to businesses from specific NAICS industries. Some contracting authorities also require NAICS codes to determine eligibility to bid on contracts.

There is no centralized point of contact to check which agency or organization requires a NAICS code. Since NAICS was developed for only statistical research purposes, the federal government does not regulate the non-statistical use of NAICS. If you are working with a particular federal agency or state agency, you can ask if you need one.

How Can I Obtain a NAICS Code?

The US Census Bureau assigns NAICS codes according to businesse- primary revenue-generating activity. You can find your NAICS code on Census.gov by one of the following processes:

Other agencies may assign you a NAICS code for other non-statistical purposes. If you want to obtain or change your busines- NAICS code, you should contact the federal agency or state agency that assigned you the code. For example, if you want to change the NAICS code on an Occupational Safety and Health Administration (OSHA) form, you should contact the Department of Labor.

If you are looking for NAICS codes for specific businesses, know that the US Census cannot release such information due to confidentiality laws. Some research firms do provide NAICS codes and other data about businesses, but the US government cannot verify its accuracy.

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Comments:

great post. i had no clue what that meant untill now. i've seen it mentioned in other articles before. thanks for the lesson :) David Sitto ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

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