Standard Industrial Classification (SIC Code) Definition

What Is a Commonplace Industrial Classification (SIC) Code?

Commonplace Industrial Classification (SIC) codes are four-digit numerical codes assigned by the U.S. authorities that categorize the industries to which corporations belong, whereas additionally organizing industries by their enterprise actions. The SIC codes have been created by the U.S. authorities in 1937 to categorise and analyze financial exercise throughout varied industries and authorities companies, and to advertise uniformity within the presentation of statistical information collected by varied authorities companies SIC codes have additionally been adopted in locations exterior the U.S., together with within the U.Ok.

Nevertheless, Commonplace Industrial Classification codes have been principally changed in 1997 by a system of six-digit codes referred to as the North American Trade Classification System (NAICS). The NAICS codes have been adopted partially to standardize trade information assortment and evaluation between Canada, the USA, and Mexico, which had entered into the North American Free Commerce Settlement.

Regardless of having been changed, authorities companies and firms nonetheless use the SIC standardized codes right this moment for classifying the trade that corporations belong to by matching their enterprise exercise with like corporations.

Understanding Commonplace Industrial Classification (SIC) Code

The SIC system classifies the financial system into 11 main divisions:

• Agriculture, forestry, and fishing
• Mining
• Building
• Manufacturing
• Transportation and public utilities
• Wholesale commerce
• Retail commerce
• Finance, insurance coverage, actual property
• Providers
• Public administration
• Nonclassifiable institutions

These are then divided into 83 two-digit main teams, and additional subdivided into 416 three-digit trade teams after which into greater than 1,000 four-digit industries.

Each firm has a major SIC code that signifies its major line of enterprise. The primary two digits of the SIC code determine the key trade group, the third digit identifies the trade group, and the fourth digit identifies the precise trade.

The Securities and Change Fee (SEC) is a significant authorities company that regulates the markets. The SEC nonetheless makes use of SIC codes. The SIC codes are listed in an organization’s digital information gathering, evaluation, and retrieval system filings (referred to as EDGAR) to point the corporate’s trade.

SIC Codes vs. NAICS codes

The SIC code system continues to stay the most well-liked trade classification system. The NAICS code system has been unable to completely exchange it because of the SIC system’s lengthy historical past, and the reluctance of companies and different organizations which have been long-term customers of SIC codes to change over to a brand new classification system.

Though the U.S. authorities stopped updating SIC codes way back to 1987, non-public information organizations stepped in and continued to replace the SIC system, together with including very particular extra classifications. Because of this, on the most outlined ranges, there are at present over 10,000 six-digit SIC codes (in contrast with 1,066 NAICS codes).

With the elevated diploma of integration throughout the North American financial system following the institution of NAFTA, U.S. corporations now have each a SIC code and a NAICS code.

How SIC Codes are Used

Companies and the federal government use SIC codes in quite a lot of methods, as mentioned beneath.

Companies

• Firms use SIC codes to determine their present prospects and potential prospects by trade.
• SIC codes can be utilized to categorise corporations for tax functions.
• Banks and collectors use SIC codes to determine the trade an organization belongs to when thought of extending credit score. 
• SIC codes are utilized by professionals and companies to create focused advertising campaigns.
• Firms can determine the competitors of their trade or area by looking for like corporations through SIC codes.
• Companies additionally use SIC codes to determine authorities contracts.

Authorities

• The federal government makes use of SIC codes to prepare and standardize key financial information for varied Federal and state companies in addition to non-public corporations.
• SIC codes make it simpler to check information throughout disparate authorities companies.
• SIC codes are additionally used for tax classification.
• The SEC makes use of SIC codes when sorting firm filings.

How To Discover Your SIC Code

There are numerous alternative ways to seek out probably the most acceptable SIC code for an organization. Examples of assorted usable sources embody:

• The USA Division or Labor maintains a web-based system search device to look SIC codes by key phrases.
• If you understand your NAICS code, there are on-line sources to determine corresponding SIC codes.
• The Safety and Change Fee publishes the report through PDF.

How To Learn SIC Codes

Every digit inside a SIC code has a that means; to learn a SIC code, every set of digits ought to be independently evaluated to find out the general that means of the code.

The First Two Digits

The primary two numbers of a SIC code identifies the enterprise’s main sector group. Although the variety of main teams fluctuates, there are usually lower than 100 main teams. These main teams all match into one of many 11 main divisions, and these first two digits outline what trade the corporate is in.

The Third Digit

The third digit is the second impartial characteristic that describes an organization. This third digit additional refines the enterprise classification and is also known as the enterprise trade group. For instance, if code 23xx refers to attire corporations:

• 232x identifies males’s and boy’s furnishings.
• 233x identifies ladies’s and misses’ furnishings.

The Fourth Digit

The final digit of a SIC code is probably the most particular identifier of an organization. Factoring on this final digit, there are actually over 1,000 combos. For instance, SIC code 2050 (emphasis on the ultimate digit) represents bakery merchandise, whereas SIC code 2052 represents cookie & cracker producers. This fourth digit additional refines the enterprise classification into a really particular enterprise class.

Actual-World Examples of SIC Codes

Apple Inc.’s SEC filings present its SIC code as 3571 (digital computer systems). The primary two digits—35—determine its main trade group as “Industrial and Business Equipment and Pc Tools,” whereas the third digit—7—narrows its trade group right down to “Pc and Workplace Tools” and the ultimate digit—1—classifies it as “digital computer systems.” Be aware that if the primary two digits are between 20 and 39, these corporations are labeled within the manufacturing division or phase of the financial system.

Regardless of the SIC codes having been changed by NAICS, you possibly can nonetheless seek for them. Under is a picture of the Commonplace Industrial Codes, together with their that means, for the banking trade (taken from the SEC’s web site).

• Financial institution of America Company (BAC), for instance, would have the SIC code of 6021 as a result of it is a nationwide business financial institution.
• State banks would have the SIC code of 6022.
• Life insurance coverage corporations can be labeled as 6311.

The Backside Line

To assist determine the suitable reviewer of firm filings based mostly on the trade an organization operates inside, the Securities and Change Fee publishes an inventory of normal industrial classification (SIC) codes. When issuing experiences, corporations should report the SIC code that the majority carefully identifies with their operations.