4.19.2021

What is a NAICS Code?

Written by Austin Chegini

scott graham OQMZwNd3ThU unsplash

In 1997, the governments of the United States, Canada, and Mexico adopted the North American Industry Classification System (NAICS). This replaced the previously used Standard Industrial Classification system.

The NAICS system uses a series of numbers to classify businesses and track their economic activity. Agencies like the U.S. Census Bureau then use these codes to study businesses and analyze the economy.

A NAICS code is between 2 - 6 digits long. The first two numbers identify a broad business type, such as Construction, while the following digits identify a sub-sector of that industry. 

In all, NAICS allows for 96 subcategories and 317 industry types.  

What are some common NAICS codes?

When you register for a NAICS code, your business will fall under a general industry group. The main industries identified via the first two NAICS code digits include the following:

  • 11: Agriculture, Forestry, Fishing, and Hunting
  • 21: Mining
  • 22: Utilities
  • 23: Construction
  • 31-33: Manufacturing
  • 42: Wholesale Trade
  • 44-45: Retail Trade
  • 48-49: Transportation and Warehousing
  • 51: Information
  • 52: Finance and Insurance
  • 53: Real Estate, Rental & Leasing
  • 54: Professional, Scientific and Technical Services
  • 55: Management of Companies and Enterprises
  • 56: Administrative & Support & Waste
  • 61: Educational Services
  • 62: Health Care & Social Assistance
  • 71: Arts, Entertainment, & Recreation
  • 72: Accommodation & Food Services
  • 81: Other Services (Except Public Administration)
  • 92: Public Administration
  • 99: Unclassified

You can view the complete list of NAICS codes here.

Why do businesses need a NAICS code?

When registering your business, the paperwork will often ask you to define your primary business activities. This primary activity will determine your NAICS code. If you have several purposes, you can also register for secondary NAICS codes. 

As stated earlier, governments require these codes to track economic activity on a large scale. For example, the Bureau of Labor Statistics groups businesses by their NAICS code when presenting its findings. 

On top of this, NAICS codes are often useful for:

  • Government contracts: The Small Business Administration and other entities award contracts to businesses under certain NAICS codes.
  • Marketing: If your business sells to other businesses, you can use NAICS codes to search for prospective customers.
  • Taxes: Government offices like the New York State Department of Taxation and Finance use these codes to help businesses.
  • Competitive analysis: You can search your NAICS code on various databases to compare your business to competitors or to understand your market better.

Who assigns your businessโ€™s NAICS code?

You are ultimately in charge of choosing your businessโ€™s NAICS code. The government will not force one upon you. 

The only exception to this policy is when business affairs relate to environmental and safety factors. With this in mind, government agencies like the Occupational Safety and Health Administration, the Department of Environmental Protection, and the U.S. Environmental Protection Agency. These entities set policies and standards based on NAICS codes, so they may classify your business under a code other than the one you select. 

What else do you need to start a business? 

After selecting your NAICS code, there will be quite a few more tasks to complete when starting a business. One of the most important is choosing the right equipment to power your business. 

For retail and hospitality businesses, this all starts with the point of sale system. Without this device, you will struggle to manage your daily affairs and spend much more time on routine tasks like inventory management and reconciliation. 

Epos Now offers POS systems that are trusted by businesses across the globe. With our hardware and software, you can:

  • Accept all payment types
  • Take stock in minutes
  • Create custom reports to track metrics
  • Integrate with dozens of apps

Contact Epos Now today to learn more about our POS solutions. 

Epos Now Call us now