What is a SIC Code?
A company’s Standard Industrial Classification (SIC) code is a four-digit code that identifies a company’s industry and the specific subcategories within that industry. The government created the SIC system in 1937 to standardize data collection when classifying business establishments.
The SIC code system consists of eleven top-level categories. The first two numbers in the code identify the industry for the business. The last two digits drill down to the specific areas within that industry.
For example, SIC codes beginning with 01 are agricultural crop production farm businesses. If the farm happens to grow soybeans, then its full SIC code is 0116. The eleven broad industrial categories include:
- Agricultural, forestry, and fishing.
- Mining.
- Construction.
- Manufacturing.
- Transportation and public utilities.
- Wholesale trade.
- Retail trade
- Finance, insurance, and real estate.
- Services.
- Public Administration
- Non-classifiable establishments
What is a NAICS Code?
In 1997, the North America Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada prompted the need to expand beyond SIC codes. The North American Industry Classification System, or NAICS, replaced the SIC code system. NAICS codes also emerged to help federal statistical agencies classify new and emerging industries.
Despite NAICS codes essentially replacing SIC, many businesses and some government agencies, such as the SEC, still use SIC codes. Many companies have both a SIC and NAICS code.
Assigning NAICS codes is based on the industry and subsector of a business. NAICS codes are six digits and operate similarly to SIC codes but with additional detail. The classification system breaks down:
- The first two digits identify the sector.
- The third digit identifies the subsector.
- The fourth digit identifies the industry title group.
- The fifth digit identifies the NAICS industry.
- The sixth digit is the National code for that industry.
How do I find my SIC Code?
The US Department of Labor provides a SIC code lookup tool. The database uses the 1987 version of SIC guidelines. When using the SIC lookup tool, you can search by SIC code or use a keyword search to find the required SIC code. Search results should yield the code you need.
How do I find my NAICS Code?
The US Census Bureau provides a NAICS lookup tool. You can search by code or enter a few keywords to find the code you need. In addition, the NAICS Association also provides a NAICS code lookup tool. Both tools provide search results for the code you need.
Frequently Asked Questions
Here are some common questions about SIC codes.
How do businesses use SIC Codes?
Businesses use the SIC or NAICS classification system for various reasons. For example, you could use SIC codes to identify competitors in your area. The NAICS system provides additional business statistics. Companies can use that statistical data for various purposes. For example, if you manufacture heating equipment, you’ll want to know the SIC code for similar manufacturers.
When banks and lending platforms receive applications for business financing, they use SIC codes to identify the business’s industry. It’s part of their data collection, even evaluating a loan application.
Companies also use SIC codes to identify their existing customers and potential customers by industry. In business-to-business (B2B) companies, they play a role in identifying their target segments.
SIC codes also help businesses develop target marketing campaigns. The codes classify businesses for tax purposes and help identify government contracts. Both systems provide additional data to add to business intelligence.
How does the government use SIC Codes?
The government uses SIC codes for tax classification and to organize and standardize critical economic data, which they supply to various government agencies and private companies.
The SEC uses the codes when sorting company filings, and they help compare data across various agencies.
Is my SIC Code found on my tax return?
Standard Industrial Codes help classify businesses regarding how a business gets taxed. The IRS determines what you should claim as net income on IRS Form Schedule C based on your company’s SIC Code.
What’s the difference between SIC and NAICS Codes?
The main difference between the two is that SIC codes are for domestic purposes and NAICS codes apply to US, Canada, and Mexico businesses. We should note that other countries, such as the UK, also adopted SIC codes.
SIC codes are four digits, while NAICS codes are six digits. NAICS codes were developed to replace the former, but as so many businesses and government agencies continue to use them, both codes are still in use.
How do I get a SIC or NAICS Code?
NAICS and SIC codes are self-identified. Usually, your business indicates its industry when completing a US Census data request or other government forms. It could take up to a year for new businesses to add your business to the database and get a SIC code.
How Many SIC Codes can a business have?
All businesses receive a primary SIC code. The primary SIC code categorizes the core industry of a business. Secondary SIC codes are possible for enterprises that cross industries, and a company can have up to five secondary SIC codes. Likewise, your business can also have multiple NAICS codes if you sell multiple products and services.
Can my business change its SIC Code?
Since SIC codes are self-identified, so you can change them if necessary. For example, let’s say your business pivots into a new industry. You can update the SIC to reflect the change. Another possible reason to change SIC codes is if you initially accidentally filed the wrong code.
If an organization, such as a credit bureau or trade publication, lists the incorrect SIC or NAICS code, you need to contact them to update it. There is no official way to change it, as various agencies and organizations maintain their own lists of established businesses.
SIC and NAICS Codes – Final Thoughts
Knowing how the government and lending institutions classify your business helps when dealing with those organizations. In addition, SIC codes can help you find competitors and identify your target customer segment and your tax classification.
While SIC and NAICS codes are not interchangeable and ultimately belong to different classifications, they largely relate to similar information. NAICS codes were supposed to replace the Standard Industrial Classification codes, but businesses and some agencies continue using them.
As a business owner, you should ensure your company has the correct SIC or NAICS code so that you are correctly classified.
