A NAICS code is a six-digit number that classifies a business by what it does. To choose yours, describe in one sentence what brings in most of your money, find the matching sector, then narrow down to the six-digit industry that fits best. If you are a sole proprietor, the place you must enter a code is line B of Schedule C, where the IRS asks for the code from its own chart of business activity codes, which is based on NAICS.
What NAICS is
The North American Industry Classification System groups establishments into industries based on the similarity of their production processes. The codes have six digits: the first two designate the sector, the third the subsector, the fourth the industry group, the fifth the NAICS industry and the sixth the national (U.S.) industry. The 2022 U.S. version has 20 sectors and 1,012 industries (2022 NAICS Manual).
NAICS is built for statistics. The manual says it may be used for administrative, regulatory or tax purposes, but the needs of agencies using it that way played no role in its design. Treat the code as a label for what you do. It does not set your legal structure or your registrations.
How to choose your code, step by step
- Write what customers pay you for, in one sentence. Result: a plain description of your main activity, such as "preparing tax returns" or "cutting hair".
- Decide which activity brings in most of your receipts. The IRS chart tells you to pick the category that best describes your primary business activity, then the activity that best identifies the main source of your sales or receipts. NAICS follows the same logic: an establishment is classified by its primary activity. Result: one primary activity, even if you do several things.
- Find the sector, then narrow down. The Census Bureau's small business page says to find your industry through the NAICS website (Census Bureau, with the code lists at census.gov/naics), and the IRS chart groups its codes by sector. Result: a short list of six-digit candidates.
- Read the neighbors. Codes next to yours often describe a different business. Result: you pick the best fit, not the first fit.
- Record the code, the list you took it from and the date. Result: the same answer every time a form asks.
Where your code matters
| Where | What it asks for | Which list to use |
|---|---|---|
| Schedule C, line B | A six-digit code for your principal business or profession | The IRS Principal Business or Professional Activity Codes chart in the Schedule C instructions, which says its codes are based on NAICS |
| Schedule C, line A | A written description of the activity that was your principal source of income; for wholesale, retail or production-related services, also the type of customer | Your own words |
| SBA size standards | The SBA assigns a size standard to each NAICS code, measured in employees or average annual receipts. Federal contracting programs use it, and a business can have more than one NAICS code if it sells several products or services | NAICS codes, with the SBA's table of size standards or its Size Standards Tool |
| Census Bureau classification survey | Its stated purpose is to assign a NAICS code to businesses, based on the primary activity an establishment performs, regardless of ownership or tax status | NAICS |
| Bank, insurance, state or platform forms | Some ask for an industry code | Read the form's instructions to see which list and edition it expects |
Sources: IRS Schedule C instructions (2025), SBA size standards page (updated July 2026) and Census Bureau classification survey FAQ (revised August 2026). Check the current-year instructions and pages, because lists and thresholds change.
Choosing the Schedule C code
The Schedule C instructions add a few rules worth knowing (IRS):
- If you own more than one business, file a separate Schedule C for each, each with its own code.
- If farming is your main source of income, the chart sends you to Schedule F instead.
- For nonstore retailers, such as online sellers, choose the code that matches your primary product.
- Line D, the EIN line, is separate: enter an EIN only if you have one, never your Social Security number.
The chart is organized by sector, with a six-digit code and a description on every line. The sample lines in the 2025 instructions include 444110 Home centers (Retail Trade), 541213 Tax preparation services (Professional, Scientific, and Technical Services) and 812111 Barber shops (Other Services). Each tax year's instructions carry their own chart, so use the one that matches the return you are filing.
Which edition is current?
NAICS 2022 is the version in effect. In July 2026, the Office of Management and Budget published a request for comments on proposed NAICS 2027 updates. If adopted, the revision would take effect for establishment data covering periods beginning on or after January 1, 2027. Some 2022 codes are reused with different content, so the notice points to crosswalk tables, and it sets no usage rules for businesses (Federal Register). Until a form tells you otherwise, use the list the form's own instructions name, and recheck before each new filing year.
Common mistakes
- Choosing by business name instead of by receipts. A company called "Studio" can earn its money from selling, teaching or repairing.
- Choosing the activity you hope to do. The IRS asks about the principal source of income you actually had.
- Copying a competitor's code. Their main activity may differ from yours.
- Using a list from the wrong edition. The Census Bureau publishes code lists for the 2022, 2017, 2012 and 2007 editions, and codes can change between editions, so use the list the form names.
- Never revisiting it. If your main income source changes, so does the code you report.
Getting a business set up for the first time? The small business registration guide covers names, EINs and licenses, and the sole proprietorship guide explains what you file each year. For tax questions, confirm with a tax professional.
Frequently asked questions
What is a NAICS code?
It is a six-digit code from the North American Industry Classification System that classifies a business by its primary activity. The first two digits are the sector, and each further digit narrows the industry.
Do sole proprietors need a NAICS code?
On the federal tax return, Schedule C line B asks for a six-digit principal business code from the IRS chart, which is based on NAICS. Other forms, such as bank or vendor applications, may ask for one too.
What if my business does more than one thing?
Choose the code for the activity that brings in most of your receipts. The IRS says to file a separate Schedule C for each business you own, and the SBA notes that a business can have more than one NAICS code if it sells several products or services.
Is NAICS 2027 in effect yet?
As of the July 2026 Federal Register notice, NAICS 2022 is in effect and the 2027 updates were only proposed. Check the Census Bureau's NAICS site and the instructions of the form you are filing for the current edition.
Sources: IRS: Instructions for Schedule C (Form 1040) (2025) · Census Bureau: 2022 North American Industry Classification System manual · Census Bureau: Your Business and Industry · SBA: Size standards · Federal Register: NAICS request for comments on proposed updates for 2027 (July 13, 2026) · Census Bureau: Business and Professional Classification Report FAQs · Census Bureau: Industry and Occupation Code Lists and Crosswalks · Census Bureau: North American Industry Classification System (NAICS) · Census Bureau: NAICS update process fact sheet
