What’s The Difference?
The NAICS Code was developed to eliminate the inconsistent logic utilized in the SIC system and to increase specificity from the 4 digit SIC system by creating a 6 digit NAICS code.
While the NAICS system utilizes a purely production-oriented structure identifying businesses only by their primary economic activity, the SIC system moves from production-oriented logic to market-oriented logic throughout its structure. This inconsistency is likely attributable to the many revisions made throughout the years to a system whose founding documents are lost to history.
Some markets may prefer the representation of their industry within the SIC system. The SIC is still widely used by Marketers to target companies based on SIC classifications that differ from NAICS classifications.
How Do NAICS & SIC Codes Relate To My Marketing Initiatives?
Industry Targeting
The first and most obvious use of NAICS & SIC codes is that they allow you to target your marketing to specific industries. With the help of NAICS Association, you can acquire a Targeted Marketing List by NAICS & SIC that can be laser targeted to suit your needs.
Market Segmentation
You may want to know who your ideal customer is. By Appending NAICS & SIC Code Information to your Existing Customer Database, you can determine which industries best represent your ideal customers. By evaluating your most frequent and high paying customers, you can implement strategies to retain your best customers and find more like them.
How Do SIC Codes And NAICS Codes Work?
Both the SIC codes and the NAICS codes classify in broad categories and then break down the classifications into more detailed sub-categories. For example, SIC codes 52-59 are for retail trades. Classification 54 is food stores, then 541 is grocery stores, 542 is meat and fish markets, and so on. Then within the 541 category, 541103 is convenience stores, 541106 is kosher markets, etc.
The classifications may change periodically, so keep that in mind and use the most recent version of your code.
When Are These Codes Required?
You may see either a requirement for a NAICS code on several U.S. government programs or forms:
Your Business Tax Return
For each type of business (corporation, partnership, sole proprietor, LLC), the income tax form requires you to enter a code for the “principal business activity.” The “principal business activity” is defined as the activity that gives you the largest percentage of “total receipts.” The IRS says “total receipts” is defined as “…the sum of gross receipts or sales (plus all other income).”
A list of the codes is on the Instructions for each business tax return. It’s based on the NAICS codes.
How Do I Find My Business In Each Code?
ou can find the SIC code or NAICS code for your business by using the U.S. Commerce Department lookup tool. Once you get the main category, you will see the sub-categories listed off to the side. Keep going deeper into the category of your business, to get the specific six-digit code for your type.
ou may have to keep trying different search terms to finally get to the one you think best fits your business type. You’ll find better results using the NAICS code, so use it first. Then, if you need an SIC code, you can search for the equivalent. The same process works for switching from an SIC code to a NAICS code. For example, I converted the SIC code for convenience stores (541103) to the NAICS code for convenience stores (445120).
The Standard Industrial Classification (SIC) system was originally developed in the 1930’s to classify establishments by the type of activity in which they are primarily engaged. The purpose of this task was to promote the comparability of establishment data to describe the US and Canadian Economies. The SIC has not been updated since 1987, however, the SIC system is still widely used. Some companies, such as D&B, have created their own 4 digit extension to the original SIC system as a means to update and expand the system so their Customers can more precisely define their Business
The North American Industry Classification System (NAICS) was established in 1997 to replace the no longer sufficient SIC system. Developed in coordination with the statistical agencies of Canada and Mexico, NAICS (pronounced ‘nakes’) establishes a North American Standard that allows for a high level of comparability in business statistics among the three countries. It is the first economic classification system to be constructed based on a single economic concept.