What is a SIC Code: The Essential Tool for Identifying Your Business’s Industry
AD
Summary:
Standard Industrial Classification (SIC) codes are four-digit numerical codes used by the U.S. government to categorize industries based on business activities. SIC codes are used to analyze economic activity and promote consistency in statistical data collection across government agencies. Although the U.S. government introduced the North American Industry Classification System (NAICS) in 1997 to replace SIC codes, SIC codes are still used by some government agencies and companies to classify industries and find similar companies. The SIC system comprises 11 major divisions, represented by two-digit codes ranging from 01 to 99, which are further subdivided into more specific industry groups and classifications.
Getting to know Standard Industrial Classification (SIC) codes
If you’re in the business world, you may have heard of Standard Industrial Classification (SIC) codes. Starting back in 1937, the US government began using these four-digit numerical codes to group industries and business activities within them. The purpose of SIC codes is to help understand economic activity and standardize statistical data collection across government agencies.
SIC codes have been widely adopted across the globe due to their practicality, including in the UK. However, to standardize industry data collection and analysis between Canada, the US, and Mexico under the North American Free Trade Agreement, the US government introduced the North American Industry Classification System (NAICS) in 1997. The NAICS is a more comprehensive six-digit system compared to SIC codes.
SIC codes have been widely adopted across the globe due to their practicality, including in the UK. However, to standardize industry data collection and analysis between Canada, the US, and Mexico under the North American Free Trade Agreement, the US government introduced the North American Industry Classification System (NAICS) in 1997. The NAICS is a more comprehensive six-digit system compared to SIC codes.
Despite the introduction of NAICS, SIC codes are still widely used by government organizations and businesses to group industries and find similar businesses based on activity. Understanding SIC codes and how they work can help businesses and analysts make better-informed decisions about which industries to invest in and how to allocate resources.
How Standard Industrial Classification (SIC) codes are divided
The SIC codes divide the economy into 11 major divisions, which include:
- Agriculture, forestry, and fishing
- Mining
- Construction
- Manufacturing
- Transportation and public utilities
- Wholesale trade
- Retail trade
- Finance, insurance, real estate
- Services
- Public administration
- Nonclassifiable establishments.
These major divisions are represented by two-digit codes ranging from 01 to 99. The primary SIC code of a company is determined by its main line of business, with the first two digits representing the major industry group, the third digit representing the industry group, and the fourth digit representing the specific industry.
While SIC codes are still used by the SEC to regulate the markets, they can also be found in a company’s EDGAR filings to indicate its industry.
Comparing SIC codes vs. NAICS codes
Even though the SIC system was officially replaced by the NAICS system in 1997, the Standard Industrial Classification (SIC) code system is still widely used in various industries today. The SIC code system comprises four-digit codes, while the NAICS system uses six-digit codes.
While the introduction of NAICS in 1997 aimed to standardize industry data collection across North America, U.S. companies still use both SIC and NAICS codes. The SIC code system’s extensive history and continued use make it challenging for the NAICS system to completely replace it, as it remains a valuable tool for businesses and organizations.
While the introduction of NAICS in 1997 aimed to standardize industry data collection across North America, U.S. companies still use both SIC and NAICS codes. The SIC code system’s extensive history and continued use make it challenging for the NAICS system to completely replace it, as it remains a valuable tool for businesses and organizations.
SIC codes have many applications both in business and government:
Business uses:
- Identifying existing and potential customers by industry
- Classifying companies for tax purposes
- Helping banks and creditors determine creditworthiness
- Creating targeted marketing campaigns
- Identifying competitors within an industry or region
Government uses:
- Identifying government contracts
- Standardizing economic data for government and private companies
- Comparing data across disparate government agencies
- Sorting company filings by the SEC.
How do you find your SIC code?
Here are three ways to find your SIC code:
- Use the online search tool provided by the United States Department of Labor to search SIC codes by keywords.
- If you know your NAICS code, there are online resources available to help you identify corresponding SIC codes.
- Check the report published by the Security and Exchange Commission in PDF format.
How do you read SIC codes?
SIC codes are read by evaluating each digit of the code.
The first two digits
The first two digits identify the company’s major sector group and are part of the 11 major divisions.
The third digit
The third digit refines the business classification and is referred to as the business industry group.
The fourth digit
The fourth and last digit is the most specific identifier and represents a very specific business category. To find the exact SIC code, one can use various resources like the US Department of Labor’s online search tool or identify the corresponding SIC code if the NAICS code is known.
Looking at real-world examples of SIC codes
Let’s dive deeper into the world of SIC codes and explore how they can provide meaningful insights into different industries. For example, take the tech giant Apple Inc., whose SIC code is 3571. This four-digit code reveals that Apple belongs to the “Industrial and Commercial Machinery and Computer Equipment” industry group, with a focus on “Computer and Office Equipment.” The final digit, 1, indicates that Apple is classified as a manufacturer of “electronic computers.” Although it may seem like a simple code, SIC codes can tell us a lot about a company’s line of business and industry focus.
Another example is Bank of America Corporation, whose SIC code is 6021. This code tells us that it’s a national commercial bank. In contrast, state banks have the SIC code 6022, while life insurance companies fall under the classification of 6311. By utilizing these codes, businesses and government agencies can better organize and standardize data, leading to more efficient comparisons and analyses of information across different industries.
Another example is Bank of America Corporation, whose SIC code is 6021. This code tells us that it’s a national commercial bank. In contrast, state banks have the SIC code 6022, while life insurance companies fall under the classification of 6311. By utilizing these codes, businesses and government agencies can better organize and standardize data, leading to more efficient comparisons and analyses of information across different industries.
How do you find your company’s SIC code?
If you’re looking to find your company’s SIC code, the best place to start is by consulting the publicly available list of standard codes issued by the US Securities and Exchange Commission (SEC). This list is regularly reviewed and updated by the Division of Corporation Finance, ensuring that it remains accurate and up-to-date.
Who is a SIC code required for
All companies are assigned a SIC code, with over 1,000 possible codes. Publicly reporting companies are typically required to use SIC codes, as the SEC uses them to assign review responsibility for company filings.
Key takeaways
- Standard Industrial Classification (SIC) codes are four-digit numerical codes used to categorize industries based on business activities.
- SIC codes are still widely used by businesses and government agencies, despite the introduction of the North American Industry Classification System (NAICS) in 1997.
- The SIC system is divided into 11 major divisions, with two-digit codes ranging from 01 to 99.
- SIC codes have various applications, such as identifying customers, competitors, and standardizing economic data for government and private companies.
- Businesses can find their SIC codes using the United States Department of Labor’s online search tool, identifying corresponding codes from NAICS, or consulting the SEC’s list of standard codes.
AD
Allan Du is a personal finance writer passionate about helping people take control of their finances. Allan strives to present readers with the right knowledge and tools, so they can make informed decisions about their money and build wealth. When he is not writing about finance, Allan enjoys pursuing his other interests, including powerlifting, kickboxing, and investing. He is an active follower of economic and political trends, always keeping watch on the latest developments that could impact the financial world.
Share this post: