North American Industry Classification System Codes, or NAICS Codes (Rhymes with Snakes!), is used by businesses and governments to classify and measure economic activity in the United States, Canada, and Mexico. NAICS is a 6-digit code system that is currently the standard used by federal statistical agencies in classifying establishments (individual business locations). Organizing establishments into a specific industry makes it easier for the government to analyze companies and industries. (Reference material: NAICS Update Process Fact Sheet.)
Your NAICS code is often asked for on various applications and forms, and NAICS codes can mean a lot! Federal and state governments use information gleaned from NAICS codes to make big decisions about taxes, credits, tariffs, and other high-level matters that could affect your business’s big picture and bottom line. And that’s something to think about the next time you have to enter 454111 or 454110 on a form!
You then may ask, ‘How do I easily go about locating my business’s NAICS codes?’ As you want to ensure that you’ve selected the correct NAICS code(s). First, each and every company will have a primary NAICS code. This number indicates a company’s primary line of business. What determines a company’s primary NAICS code is the code definition that generates the highest revenue for that company at a specific location in the past year. The first two digits designate the largest business sector, the third digit designates the sub-sector, the fourth digit designates the industry group, and the fifth digit designates particular industries. The last digit designates national industries.
Example of NAICS Code Breakdown
|Subsector||441||Motor Vehicle & Parts Dealer|
|Industry Group||4412||Other Motor Vehicle Dealers|
|NAICS Industry||44122||Motorcycle, Boat, & Other Vehicle Dealers|
|National Industry||441221||Motorcycle, ATV, and Personal Watercraft Dealers|
A visit to https://www.census.gov/naics/ will provide a keyword search for all NAICS codes and is a beneficial tool to locate a business’ primary and non-primary NAICS codes. After selecting the primary NAICS code, then choose all secondary NAICS codes that apply. In terms of seeking diversity certification, it is advantageous to select as many secondary NAICS codes that apply to the business. Adding codes after receiving certification can prove difficult and in addition, much more paperwork!
Be aware that some NAICS codes are retired and new NAICS codes are added every five years, with the next update occurring in 2022. Whenever a NAICS refresh happens we recommend verifying that all your current codes are still active and searching for any additional codes that may have been added that match your business.