Cracking the code on NAICS: What You Need to Know for Sales Tax Registration

By TEAM Software February 16, 2016 Categories:

If you’ve never heard of a NAICS code before filling out a sales tax registration form, you’re not alone.  The six-digit codes are a system of classification. Remember the Dewey Decimal system at your local public library? NAICS codes are similar, except that instead of classifying books by topic, NAICS classifies businesses by industry.

The North American Industry Classification System (NAICS) was created in 1997 as part of a joint effort by the governments of the United States, Mexico and Canada.  The six-digit codes replaced an older categorization system (four-digit SIC codes) and are updated every five years to reflect new and changing industries. The most recent NAICS revisions took place in 2012; another set of revisions is expected in 2017.

State departments of revenue use NAICS codes primarily for two purposes: compiling statistical data about taxation in different industries, and making sure your business receives any relevant information about new laws, exemptions, or regulations that could affect you.  It’s important to identify the right code so that the information you receive is relevant and targeted to your business.

Your NAICS code is easy to find and can be obtained with no additional registration or paperwork from your business.  Just visit the NAICS page on the census.gov website, then type in a keyword that describes your business.  Most contractors in the security industry will fall under an NAICS code that begins with 56161 that covers Investigation, Guard and Armored Car Services. Similarly, building service contractors likely will fall under the 561720 code covering Janitorial Services.

In some cases, your business may involve more than one business activity. Some states allow you to record a NAICS code for a secondary business activity as well as a primary one. Follow the same steps above to keyword search for the NAICS code for any secondary business activities.

Now that you’ve got your industry code down, put yourself in another tax category: companies who choose Avalara to automate sales and use tax in their ERP, ecommerce or accounting systems.  The fastest, easiest and most accurate way to be tax compliant, AvaTax is in a class by itself.

For more practical tips on the topic, read 6 Ways to Simplify Sales Tax Registration and Filing.

TEAM Software is committed to providing our clients with the best possible solutions to help them profit from efficiency. One way TEAM does this is by partnering with other companies who provide innovative technology solutions that complement TEAM’s existing suite of products. We recently announced our strategic partnership with Avalara, a company developing best-in-class sales tax compliance software. This was a repost from Avalara.com.