Who Assigns SIC Codes?
SIC is the acronym for Standard Industrial Classification, a numbering scheme that categorizes industries and services. The SIC code is seen on various government forms and is used by agencies to compile and compare industry statistics. The SIC code is also used as a means to find companies in a specific industry type.
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Features
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Just as taxonomy categorizes plants and animals, SIC codes categorize industries and services. First, the numbering scheme groups broad industry categories into divisions. The divisions are separated into major groups, which are further subdivided into industry groups and specific industry types. The SIC system assigns numbers to each of these levels, resulting in a four-digit code for each specific industry or service category. SIC code numbers range from 0111 (agricultural production crops---wheat) to 9999 (public administration non-classifiable establishments).
Code Selection
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The SIC manual provides definitions for each level of the classification scheme. The definitions describe the type of industry for each category and provide guidance on proper categorization. SIC codes are not assigned by any central agency. Individual businesses select their SIC code based on the best judgment of their owners or managers. Companies report their SIC code on a number of government filings including census and tax forms.
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Limitations
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The SIC code scheme was developed to categorize industrial processes that existed at the time it came about. The codes were designed around traditional manufacturing businesses. Although reviewed and revised several times since the 1930s, the SIC code structure still does not recognize industries that have emerged in recent years, such as e-commerce and biotechnology.
Warning
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Since individuals at the various businesses select and assign SIC codes, code selection may be inconsistent. Individuals may interpret the category descriptions differently and assign different SIC codes to the same business type. Alternatively, different individuals at the same business may report different SIC codes at different times. In the case of large conglomerates, more than one code may apply, yet only one can be reported for a specific business location.
Other Types
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The North American Industry Classification System (NAICS) is a new business classification scheme adopted in 1997. Developed jointly by Canada, Mexico and the U.S., the system allows the comparison of business statistics across North America. The NAICS scheme addresses many of the shortcomings of the SIC code system. Other classification schemes include the International Standard of Industrial Classification (ISIC) and the Standard International Trade Classification (SITC). These codes are used to classify economic activity that crosses borders.
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