The North American Industry Classification System (NAICS) is used by the United States, Mexico and Canada to help identify industry performance and forecast economic conditions.
This article will provide a clearer understanding of how NAICS codes are assigned and how they are used:
NAICS
The NAICS is an abbreviation from the North American Industry Classification System. The NAICS are standard codes assigned to business sectors and industries that can be used for statistical purposes in classifying businesses for collecting, analyzing, and publishing data related to the United States economy.
NAICS history
NAICS was adopted in 1997 to replace the Standard Industrial Classification (SIC) system. This was a joint effort between the United States, Mexico, and Canada to allow for a better comparability in business statistics among the North American countries.
Finding your NAICS code
Fingercheck can't help with determining your company's NAICS code because we do not have all the information needed to accurately search for and provide your NAICS code. Search for your NAICS code using the link - https://www.census.gov/naics/
Your NAICS code is self-assigned by you. To determine your company’s NAICS code, go to NAICS at the U.S. Census Bureau's website.
You can search for your business NAICS code by entering keywords or the 2-6 digit code.
How is the NAICS code used?
Federal and state agencies use the NAICS to classify businesses when collecting, analyzing, and publishing statistical data about the United States economy.
This numeric coding system is also used for regulatory, contracting, and taxation purposes. Some states may use your NAICS code to determine your new employer rate when registering for a payroll tax account.
Why do I need a NAICS code?
There are many reasons why you should be aware of your NAICS code, or at the very least the industry your company would be used for statistical reporting.
Industry trends - Knowing how your industry is adapting to current political and economic conditions allows you to properly forecast your business needs. This also allows you to stay informed of regulatory and policy changes that may impact your business operations.
Taxes - NAICS codes are used to determine tax incentives, and business expenses when reporting taxes. Using an incorrect NAICS code can result in a greater chance of being audited.
Financing - NAICS codes are used by banks to determine a company's risk when lending funds. When banks lend money, they will use your industry’s NAICS code to determine if your company aligns with their portfolio with expected risk and return.
Government programs - The government uses NAICS codes to identify when granting businesses contracts and tax incentives. Knowing your NAICS code will make it easier in finding government programs and contracts.
Marketing - NAICS codes can be helpful with identifying your customers and competitors. Using your customers’ NAICS codes allows you to better differentiate yourself from your competitors, and effectively market your product and services.
Do NAICS codes change?
Yes, NAICS codes change every five years. 2022 was the last year the NAICS codes were reviewed and changed. During this time codes existing codes may be amended, and new codes will be added.
You can still review previous NAICS codes at the US Census website.
NAICS classification
The NAICS code can be 5 or 6 digits. The first 5-digits of the NAICS code are standard reporting in the United States, Mexico, and Canada. NAICS codes having 6-digits means one of the three countries will use the last digit for their own use when compiling and reporting data.
The NAICS classification:
Sector: 2-digit code
Subsector: 3-digit code
Industry Group: 4-digit code
NAICS Industry: 5-digit code
National Industry: 6-digit code
FAQ
What is NAICS?
NAICS, or the North American Industry Classification System, is a standardized system used for classifying business establishments based on their primary economic activities. It provides a consistent framework for statistical analysis and reporting.
Why is NAICS important?
NAICS is essential for data collection, analysis, and reporting across different industries. It enables businesses, policymakers, and researchers to understand economic trends, make informed decisions, and conduct accurate statistical comparisons.
How is NAICS different from SIC?
NAICS differs from the Standard Industrial Classification (SIC) system because of the ability to adapt to changes in the economy and industries. NAICS is more detailed and flexible, allowing for a more accurate classification of businesses based on their activities.
How is NAICS code assigned?
Businesses are assigned a NAICS code based on the primary economic activity they engage in. The code is determined by the nature of the goods or services they provide.
Can a business have multiple NAICS codes?
Yes, a business can have multiple NAICS codes if it engages in different business activities, such as selling multiple products and services. This allows for a more accurate representation of the diverse activities a business may undertake.
Why is NAICS important for government contracting?
NAICS codes are crucial for government contracting as they help identify businesses eligible for specific contracts. Government agencies use NAICS codes to streamline the procurement process and ensure contracts are awarded to businesses in relevant industries.
How often are NAICS codes updated?
NAICS codes are updated periodically to reflect changes in the economy and emerging industries. The updates ensure that the classification system remains current and relevant.
Can a business change its NAICS code?
Yes, a business can change its NAICS code if there is a significant shift in its primary economic activities. However, it's essential to consult with relevant authorities and update official records accordingly.
These FAQs offer general information about NAICS, and businesses are encouraged to refer to official documentation and authorities for specific details and guidance.
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