What Is a Standard Industrial Classification (SIC) Code?
Standard Industrial Classification (SIC) codes are four-digit numerical codes assigned by the U.S. government that categorize the industries to which companies belong, while also organizing industries by their business activities. The SIC codes were created by the U.S. government in 1937 to classify and analyze economic activity across various industries and government agencies, and to promote uniformity in the presentation of statistical data collected by various government agencies SIC codes have also been adopted in places outside the U.S., including in the U.K.
- Standard Industrial Classification (SIC) codes are four-digit numerical codes that categorize the industries that companies belong to based on their business activities.
- Standard Industrial Classification codes were mostly replaced by the six-digit North American Industry Classification System (NAICS).
- Despite having been replaced, government agencies, including the SEC, and some companies still use SIC codes today.
However, Standard Industrial Classification codes were mostly replaced 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 collection and analysis between Canada, the United States, and Mexico, which had entered into the North American Free Trade Agreement.
Despite having been replaced, government agencies and companies still use the SIC standardized codes today for classifying the industry that companies belong to by matching their business activity with like companies.
Understanding Standard Industrial Classification (SIC) Code
The SIC system classifies the economy into 11 major divisions:
- Agriculture, forestry, and fishing
- Transportation and public utilities
- Wholesale trade
- Retail trade
- Finance, insurance, real estate
- Public administration
- Nonclassifiable establishments
These are then divided into 83 two-digit major groups, and further subdivided into 416 three-digit industry groups and then into more than 1,000 four-digit industries.
Every company has a primary SIC code that indicates its main line of business. The first two digits of the SIC code identify the major industry group, the third digit identifies the industry group, and the fourth digit identifies the specific industry.
The Securities and Exchange Commission (SEC) is a major government agency that regulates the markets. The SEC still uses SIC codes. The SIC codes are listed in a company's electronic data gathering, analysis, and retrieval system filings (called EDGAR) to indicate the company's industry.
For example, Apple Inc.'s SEC filings show its SIC code as 3571 (electronic computers). The first two digits—35—identify its major industry group as "Industrial and Commercial Machinery and Computer Equipment," while the third digit—7—narrows its industry group down to "Computer and Office Equipment" and the final digit—1—classifies it as "electronic computers." Note that if the first two digits are between 20 and 39, these companies are classified in the manufacturing division or segment of the economy.
SIC Codes vs. NAICS codes
The SIC code system continues to remain the most popular industry classification system. The NAICS code system has been unable to fully replace it due to the SIC system's long history, and the reluctance of businesses and other organizations that have been long-term users of SIC codes to switch over to a new classification system.
Although the U.S. government stopped updating SIC codes as far back as 1987, private data organizations stepped in and continued to update the SIC system, including adding very specific additional classifications. As a result, at the most defined levels, there are currently over 10,000 six-digit SIC codes (compared with 1,066 NAICS codes).
With the increased degree of integration within the North American economy following the establishment of NAFTA, U.S. companies now 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 discussed below.
- Companies use SIC codes to identify their existing customers and potential customers by industry.
- SIC codes can be used to classify companies for tax purposes.
- Banks and creditors use SIC codes to identify the industry a company belongs to when considered extending credit.
- SIC codes are used by professionals and businesses to create targeted marketing campaigns.
- Companies can identify the competition in their industry or region by searching for like companies via SIC codes.
- Businesses also use SIC codes to identify government contracts.
- The government uses SIC codes to organize and standardize key economic data for various Federal and state agencies as well as private companies.
- SIC codes make it easier to compare data across disparate government agencies.
- SIC codes are also used for tax classification.
- The SEC uses SIC codes when sorting company filings.
Real-World Examples of SIC Codes
Despite the SIC codes having been replaced by NAICS, you can still search for them. Below is an image of the Standard Industrial Codes, along with their meaning, for the banking industry (taken from the SEC's website).
- Bank of America Corporation (BAC), for example, would have the SIC code of 6021 because it's a national commercial bank.
- State banks would have the SIC code of 6022.
- Life insurance companies would be classified as 6311.