What Is a Standard Industrial Classification (SIC Code)?
The Standard Industrial Classification (SIC) are four-digit codes that categorize the industries that companies belong to while organizing the industries by their business activities. The SIC codes were created by the U.S. government in 1937 to help analyze economic activity across various industries and government agencies.
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 in 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.
- The Standard Industrial Classification (SIC) are four-digit 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 and companies still use the SIC codes today, including by the SEC.
Understanding Standard Industrial Classification (SIC Code)
The Standard Industrial Classification codes were intended to improve communication within the U.S. government, across industries, and between countries. SIC codes were adopted in places outside the U.S., such as the U.K. government.
The Securities and Exchange Commission (SEC) is a major government agency that regulates the markets and still uses SIC codes. The SIC codes are listed in a company's electronic data gathering, analysis, and retrieval system (EDGAR) filings to indicate the company's industry. For example, if you see SIC code 3721 on Hugh's Aerospace Corporation's EDGAR filing, you will know that the company is a part of the aircraft industry.
How SIC Codes are Used
Both companies and government agencies use SIC codes for different reasons. Below are some of the most common uses for SIC codes.
- 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.
- The government can use SIC codes to organize and standardize data for various Federal and state agencies as well as private companies.
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 from the SEC's website.
- Bank of America Corporation (BAC), for example, would have the SIC code of 6021 since it's a national commercial bank.
- State banks would have the SIC code of 6022.
- Life insurance companies would be classified as 6311.