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What is an NAICS code?

Introduction

The North American Industry Classification System (NAICS) is an industry classification system developed by the statistical agencies of Canada, Mexico and the United States. It is used by business and government to classify business establishments according to type of economic activity or industry.

The main purpose of the NAICS is to collect, analyze and publish statistical information about the economy. It may also be used for taxation, regulation or other non-statistical purposes.

The most recent revision was in 2017; it is updated every 5 years to reflect changes to emerging industries.

The NAICS replaces the previous classification system, the SIC (Standard Industrial Classification), used until 1980 in Canada.

The full code is available at:

Hierarchy of numbers

A NAICS code can have up to 6 digits. The breakdown:

  • The 1st and 2nd numbers = economic sector
  • The 3rd number = sub-sector
  • The 4th number = industry group
  • The 5th number = industry
  • The 6th number = national industry (a zero indicates no national industry is needed)

naics hierarchy of numbers

In Canada, there are:

  • 20 sectors
  • 102 sub-sectors
  • 323 industry groups
  • 708 industries
  • 924 Canadian industries

Four sectors are goods-producing and sixteen are service-producing industries.

table that lists the 20 sectors with code

Source: NAICS 2017

How to select the correct NAICS code

Businesses are expected to self-select the NAICS code that most closely describes their main business activity. The NAICS Association has a helpful search option that will search possible NAICS codes based on keyword searching.

Many businesses have more than one revenue-producing line of business, so you can assign more than one NAICS code to your business.

Businesses can change their NAICS codes every 5 years, when the NAICS code is updated and industries are added or edited.

Why do I need a NAICS code for my business?

Businesses are not required to register a NAICS code directly, but the mandatory Business Register survey from Statistics Canada does require businesses to list a NAICS code when completing the survey.

For small businesses, it is helpful to know your NAICS code to help find information for business plans, marketing plans or looking for economic forecasting information.

Filing corporate income tax returns for your business does require your business’ NAICS code. Government agencies look at statistics when determining which industries are given tax incentives and make them available only to certain NAICS industries.

Government contracts often require businesses to provide the NAICS before awarding contracts to identify the type of business is applying for the contract. Also, some government funding for business is available to specific NAICS industries, so it is a good idea to know the NAICS code for your business.

Additional Resources