NAICS, MCC and SIC codes are codes that are important for businesses which accept payments from customers online. Search types of codes can have an impact on interchange rates tax payments the manner of classification of a business by the Internal Revenue Service or IRS.
What Exactly Are NAICS, MCC and SIC Codes?
Merchant Category Classification or MCC codes are 4-digit codes used by the credit card industry for the classification of businesses to various market segments.
SIC or Standard Industrial Classification codes are 4-digit numerals as well. Various statistical agencies in the US, such as the US Office of Management and Budget use these. All kinds of services and industries are categorized into 10 divisions with the help of SIC codes. The broad division category was indicated by the first two digits where is the industry group and industry type ware signified by the last two digits.
NAICS or North American Industry Classification System codes replaced the SIC codes in 1997 as per the US Census Bureau. Economic activity is classified by the NAICS system into 20 different industry sectors. These include five sectors that produce goods and 15 sectors associated with services. There are 6 digits in the NAICS codes, which represent:
- The primary business sector
- The sub-sector
- The industry group
- The specific industry
- The country specific numeral (for Mexico, Canada or US).
How are NAICS, MCC and SIC Codes Similar and Dissimilar?
These codes have various similarities and dissimilarities.
Similarities
With all these codes, insights are available about the type of business operated by a company. These classifications can be used for target refinement, in case you have a business that wishes to target a specific market or considering targeting possible clients.
Ensuring the most precise classification for your business can be very beneficial. You might be eligible for tax incentives or reduced interchange fees. Your business can also be able to accept some forms of payments.
Dissimilarities
These codes are issued by different organizations and bodies. These also have different purposes. NCC codes are used for risk measurement by a few credit card companies.
SIC is still used widely for classify businesses as well as for non statistical reasons such as – to target companies for marketing purposes.
NAICS is used for federal economic study applications – such as analysis, presentation, tabulation and collection of economic statistics. These can be assigned by the US Census Bureau or some other agencies or even self-assigned. These codes are applied for statistical as well as non-statistical purposes.
