Sic Code – Detailed Information!

This system was created by a group called the Interdepartmental Committee on Industrial Statistics, which was formed by the Central Statistical Board of the United States.

They made a list of industries for manufacturing in 1938 and a list of non-manufacturing industries in 1939, which became the first SIC code system for the country.

The SIC system turned finalized in 1987, and even though it was utilized by the Census Bureau till 1992, many databases nonetheless use it for organizing information. In a few cases, mainly in retail, the use of SIC codes is more useful and green than the use of NAICS codes.

What is sic code?

When you’re making an easy chart of accounts, you may provide a collection of numbers for every form of account. For example, you might use the 100s for assets and the 200s for liabilities.

What is sic code
source: qualitycompanyformations

Within each category, there are specific accounts that get more specific numbers. For instance, cash is an asset, so you could label it as 110.

The government follows a similar process to categorize U.S. businesses. Just like the codes in your chart of accounts, the government has assigned SIC codes to group businesses based on their industry.

Role of sic in business:

The government created SIC codes to classify U.S. businesses. These codes have four-digit numbers that group businesses by industry. Every business has a SIC code.

SIC codes started in 1937. In 1997, NAICS codes were created to standardize industry classifications in the U.S., Canada, and Mexico. Even though NAICS codes exist now, SIC codes are still used sometimes.

Usage of these codes:

Businesses:

  • Companies use SIC codes to become aware of their clients and potential clients primarily based totally on industry.
  • SIC codes help classify companies for tax purposes.
  • Banks and creditors use SIC codes to determine the industry of a company when deciding to offer credit.
  • Professionals and businesses use SIC codes for targeted marketing campaigns.
  • SIC codes help companies find competitors in their industry or region.
  • Businesses use SIC codes to identify government contracts.

Government:

  • The government uses SIC codes to organize and standardize economic data for different agencies and private companies.
  • SIC codes help in comparing data across different government agencies.
  • SIC codes are used for tax classification purposes.
  • The SEC (Securities and Exchange Commission) uses SIC codes to sort company filings.

Divisions of SIC codes:

The system is divided into 10 sections, labeled A to J. Each section is further divided into larger groups with 2-digit codes and then into more specific categories with 4-digit codes.

Divisions of SIC codes
source: yourvirtualofficelondon

Here’s a breakdown of the divisions:

  • Division 1: Agriculture, Forestry, And Fishing
  • Division 2: Mining
  • Division 3: Construction
  • Division 4: Manufacturing
  • Division 5: Transportation, Communications, Electric, Gas, And Sanitary Services
  • Division 6: Wholesale Trade
  • Division 7: Retail Trade
  • Division 8: Finance, Insurance, And Real Estate
  • Division 9: Services
  • Division 10: Public Administration

Types of sic codes:

  • Primary 
  • Secondary

Every business has a primary Standard Industrial Classification (SIC) code, which represents its main industry category.

Additionally, businesses can have up to five secondary SIC codes that classify other industries they are involved in but that are not their main focus. These secondary industries may overlap with the main industry or be unrelated. 

For example, if you own a local grocery store that also has gas pumps, your main business is the grocery store, so your SIC code would be 5411. However, since you also offer filling stations, your secondary SIC code would be 5541.

Finding Your SIC Code – Useful Resources and Methods:

When searching for the most suitable SIC code for a company, there are several resources and methods available to assist you. Here are some examples:

Finding Your SIC Code
source: abc-amega
  • United States Department of Labor: The department maintains an online search tool that allows you to search for SIC codes using keywords.
  • NAICS Code Conversion: If you know your NAICS code, you can utilize online resources that provide the corresponding SIC codes for easy reference and conversion.
  • Security and Exchange Commission (SEC): The SEC publishes reports in PDF format, which can be a valuable source of information when determining the appropriate SIC code for your company.

How to Interpret SIC Codes?

SIC codes carry significance in each of their digits, and it is important to analyze each set of digits separately to decipher the overall meaning of the code. By independently evaluating the digits, you can gain a comprehensive understanding of the conveyed information within the SIC code.

The First Two Digits – Major Sector Group:

The principal sector group of a business is identified by the first two digits of the SIC code. These digits classify the company into one of the 11 major divisions and provide an overview of the industry it belongs to.

The Third Digit – Business Industry Group:

The third digit of a SIC code plays an important role in describing a company and is known as the business industry group. It provides further distinction and refinement within the broader industry classification.

For instance, let’s consider the example of SIC code 23xx, which pertains to apparel companies:

  • 232x represents businesses involved in men’s and boy’s furnishings.
  • 233x represents businesses involved in women’s and misses’ furnishings.

The Fourth Digit – Specific Business Category:

The last digit of a SIC code is the most precise identifier. It offers detailed categorization, creating over 1,000 possible combinations. This digit represents a very specific business category, allowing for a more precise classification of the company’s products or services.

An example:

SIC code 6500 represents the entire real estate industry. Within this industry, SIC code 6510 specifically identifies real estate operators.

SIC code 6512 further narrows down the classification to nonresidential buildings, while SIC code 6513 specifically refers to operators of apartment buildings.

SIC codes/NAICS codes:

SIC codes and NAICS codes serve a similar purpose but are used differently. Compared to SIC classifications, NAICS classifications provide more precise industry categorizations, allowing for a more accurate determination of a company’s industry.

SIC codes/NAICS codes
source: hostmerchantservices

In 1987, the American government stopped updating the SIC codes. It is advisable to exercise caution when using updated SIC codes, even though some private data businesses keep updating them to be more detailed than NAICS numbers.

They can differ amongst various data businesses and are not recognised by the government in any official capacity. It is recommended to rely on the government-made list for matters pertaining to the government.

Private companies frequently use SIC codes to target and market to potential customers in particular industries.

If you hire a private data provider to help you uncover potential customers, they’ll probably use their updated codes to whittle down the results and find more suitable candidates. NAICS numbers are more frequently used for statistical analysis and government contracting.

FAQ’s:

1. What Does SIC Code Stand for?

The Standard Industrial Classification (SIC) System Search is a tool provided by the Occupational Safety and Health Administration (OSHA).

2. Does every business have a SIC code?

Yes, every business has a SIC code. It helps categorize businesses based on their industry.

Wrapping up:

The Securities and Exchange Commission offers a list of standard industrial classification (SIC) codes to assist in determining the appropriate reviewer of corporate filings based on the sector a firm works in.

Companies are required to choose the SIC code that best describes their activity when releasing reports.

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