Standard Industrial Classification (SIC Code)

What Is a Standard Industrial Classification (SIC) Code?

Standard Industrial Classification (SIC) codes are four-digit mathematical codes assigned by the U.S. government that arrange the industries to which companies belong, while likewise sorting out industries by their business activities. The SIC codes were made by the U.S. government in 1937 to characterize and examine economic activity across different industries and government agencies, and to advance consistency in the introduction of statistical data collected by different government agencies SIC codes have likewise been adopted in places outside the U.S., remembering for the U.K.

Notwithstanding, Standard Industrial Classification codes were generally supplanted in 1997 by a system of six-digit codes called the North American Industry Classification System (NAICS). The NAICS codes were adopted in part to standardize industry data assortment and analysis between Canada, the United States, and Mexico, which had gone into the North American Free Trade Agreement.

Notwithstanding having been supplanted, government agencies companies actually utilize the SIC standardized codes today for ordering the industry that companies belong to by matching their business activity with like companies.

Figuring out Standard Industrial Classification (SIC) Code

The SIC system arranges the economy into 11 major divisions:

Agriculture, ranger service, and fishing
Mining
Development
Manufacturing
Transportation and public utilities
Wholesale trade
Retail trade
Finance, insurance, real estate
Administrations
Public organization
Nonclassifiable foundations

These are then separated into 83 two-digit major groups, and further partitioned into 416 three-digit industry groups and afterward into in excess of 1,000 four-digit industries.

Each company has a primary SIC code that shows its fundamental line of business. The initial two digits of the SIC code distinguish the major industry group, the third digit recognizes the industry group, and the fourth digit recognizes the specific industry.

The Securities and Exchange Commission (SEC) is a major government agency that directs the markets. The SEC actually utilizes SIC codes. The SIC codes are listed in a company's electronic data gathering, analysis, and retrieval system filings (called EDGAR) to show the company's industry.

For instance, Apple Inc's. SEC filings show its SIC code as 3571 (electronic computers). The initial two digits — 35 — recognize its major industry group as "Industrial and Commercial Machinery and Computer Equipment," while the third digit — 7 — limits its industry group down to "Computer and Office Equipment" and the last digit — 1 — arranges it as "electronic computers." Note that assuming the initial two digits are somewhere in the range of 20 and 39, these companies are classified in the manufacturing division or segment of the economy.

SIC Codes versus NAICS codes

The SIC code system keeps on excess the most well known industry classification system. The NAICS code system has been not able to completely supplant it due to the SIC system's long history, and the hesitance of businesses and different organizations that have been long-term users of SIC codes to switch over to another classification system.

Albeit the U.S. government stopped refreshing SIC codes as far back as 1987, private data organizations stepped in and kept on refreshing the SIC system, including adding quite certain extra classifications. Accordingly, at the most defined levels, there are right now north of 10,000 six-digit SIC codes (compared with 1,066 NAICS codes).

With the increased degree of integration inside the North American economy following the foundation of NAFTA, U.S. companies presently have both a SIC code and a NAICS code.

How SIC Codes are Used

Businesses and the government use SIC codes in a number of ways, as examined below.

Businesses

Companies use SIC codes to distinguish their existing customers and expected customers by industry.
SIC codes can be utilized to characterize companies for tax purposes.
Banks and creditors use SIC codes to distinguish the industry a company belongs to while considered broadening credit.
SIC codes are utilized by experts and businesses to make targeted marketing efforts.
Companies can recognize the competition in their industry or region via looking for like companies by means of SIC codes.
Businesses likewise use SIC codes to recognize government contracts.

Government

The government utilizes SIC codes to arrange and standardize key economic data for different Federal and state agencies as well as private companies.
SIC codes make it more straightforward to compare data across different government agencies.
SIC codes are likewise utilized for tax classification.
The SEC purposes SIC codes while arranging company filings.

Real-World Examples of SIC Codes

In spite of the SIC codes having been supplanted by NAICS, you can in any case look for them. Below is a picture of the Standard Industrial Codes, along with their importance, for the banking industry (taken from the SEC's website).

Bank of America Corporation (BAC), for instance, would have the SIC code of 6021 on the grounds that it's a national commercial bank.
State banks would have the SIC code of 6022.
Life insurance companies would be classified as 6311.

Features

In spite of having been supplanted, government agencies, including the SEC, a few companies actually use SIC codes today.
Standard Industrial Classification (SIC) codes are four-digit mathematical codes that classify the industries that companies belong to in light of their business activities.
Standard Industrial Classification codes were for the most part supplanted by the six-digit North American Industry Classification System (NAICS).