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NAICS Codes, Explained

 

NAICS codes are sometimes requested when businesses file government documents. But unlike some federally issued numbers, like EINs, NAICS codes are not assigned to individual business. Instead, business owners are usually tasked with finding the NAICS code that best suits their line of business. Here’s what you need to know about finding (and using) a NAICS code:

What is an NAICS code?

NAICS (pronounced “nakes”) stands for North American Industry Classification System. As the name suggests, NAICS codes are two- to six-digit numbers associated with specific industries. For example, a shoe store would use code 448210, while a shellfish farming business would use code 112512. In most cases, business owners are asked to find the code that best fits their business.

What’s the purpose of an NAICS code?

NAICS codes were developed in 1997 to help federal statistical agencies collect data on the US business economy. But the NAICS classification system can be used for other purposes beyond statistics. For instance, it can be used by government entities to offer tax incentives to businesses with a specific NAICS classification, or by individual companies to target marketing campaigns to organizations with a certain NAICS classification.

How do I find my NAICS code?

You can search for your NAICS code using the NAICS Code List. You’ll see a list of general industries—known as “sectors”—beside a corresponding list of two-digit numbers. To get a more specific industry code—aka “subcategory”—click on your general industry and you’ll then see an expanded list of codes up to six digits long, all corresponding to industry subcategories.

For example, the sector “Information” (51) expands out into dozens of subcategories, including “Book Publishers” (511130), “Radio Stations” (515112), and “Greeting Card Publishers” (511191).

When do I need to use my NAICS code?

You may need a NAICS code for both federal and state-level filings:

  • Federal government: NAICS codes are often required when filing taxes using Form 1040. The IRS uses NAICS codes for collecting statistical information, as well as sending information to particular industries.
  • State government: Not all states require businesses to include a NAICS code when filing business-related documents. However, in some states NAICS codes are mandatory. Whatever the case, you’ll usually be prompted to enter a NAICS code (or not) when you fill-out state documents.
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