For handmade sellers needing to complete a Schedule C form or register for sales tax, choosing a code for your Principal Business or Professional Activity (NAICS) can be confusing!
We outline some of the most common NAICS codes for your craft business so you can choose this code with confidence.
What is a NAICS code?
Let’s start with explaining what a NAICS is. Essentially, NAICS (rhymes with “snakes”) stands for the North American Industry Classification System and is a 6 digit code used by business and government agencies to classify businesses in terms of their economic activity. As it is a standard, it can be used across different departments to collect, record and analyse economic data.
This means the government can use this code to put you in a bucket with other craft handmade sellers that make similar items to you and compare your revenue and expenses to make sure that they fall within a certain range.
NAICS codes are updated every 5 years in order to reflect changes in business and industry, so it’s best to keep checking to make sure that your selected code is the best representation of your business.
Tip: Some state governments will offer tax incentives to businesses from different NAICS industries, so it’s a good idea to find the right code for your business so you don’t miss out on any incentives are available.
What is a Business Activity Code?
A business activity code (BAC) is a five-digit code that classifies businesses according to their primary activities. The North American Industry Classification System (NAICS) is a six-digit code system that is used to classify businesses by their industry. Your BAC is not necessarily the same as your NAICS code. However, the two codes are often used together to provide more information about a business. The BAC provides information about the specific activity of a business, while the NAICS code provides information about the broader industry in which the business operates. Together, these codes can be used to get a more complete picture of a business.
NAICS codes for crafters
As a handmade crafter, you can be classed as a manufacturer as you take raw materials and transform them using a process into goods for sale - many handmade sellers don’t tend to think of themselves this way and often choose a general retail category for their business.
Although your business may be classed in some cases under a retail category, it may be in your better interests to choose a manufacturing category instead: the IRS will compare your return to others in your own industry and will also assume that you will most likely have significant inventory costs (this is good as you can then claim your material costs as COGS).
Each NAICS company group is assigned a four-digit code. The first two digits of a company’s code indicate its major industry group, while the second two digits further specify the company’s business within that industry group.
This means for starters, you can assume that your NAICS code will probably fall within the Manufacturing 31-33 code range.
Tip: Ensure that you are registered consistently with your state to avoid any issues with your selected code - the code you choose here may be subject to additional legislation or requirements so it’s best to double-check this with your state authority before lodging your Schedule C return.
Also, don’t use the 999999 code if you are feeling overwhelmed with the choices and just want to make a decision - this indicates to the IRS that you may need further investigation to find out what your true industry is (and trust me, you don’t want any additional attention from the IRS!).
As with all taxation advice, this information should be used as a guide - it is recommended that you seek the advice of a taxation specialist in your own state to confirm that your selected code is the best one to use for your circumstances.
NAICS codes for jewelery makers / jewelers
There are a couple of NAICS codes to choose from if you are a jewelry manufacturer. There are several codes to choose from, but the two most relevant are 339910 and 423940.
The first code is for businesses that mainly make jewelry items, while the second code is for businesses that make items mainly for the purposes of trade shows.
339910 : Jewelry and Silverware Manufacturing. Use this code if you mainly make your jewelry items
423940 : Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers If you are a jewelry maker, however you sell mainly at Jewelry Trade Shows, this is an option for you.
Another option for jewelry stores is 448310, which is typically for businesses that sell via art shows.
448310 : Jewelry Stores Reserved for jewelry sellers that sell retail only at art shows or by appointment only
NAICS codes for soap making / handmade soap
The most relevant code for soap manufacturing is 325611, which covers soap and cleaning compound manufacturing. However, there are other codes that soapmakers may need to be aware of, depending on the type of soap they make. For example, if they make medical or health-related soap, they’ll need to use code 325612.
Soapmakers can choose from the following two NAICS codes - if you make both products (as many do), select the one that represents the larger part of your product range.
325611 : Bar Soap Manufacturing This NAICS code is useful for businesses that mainly produce bars of soap.
325620 : Bath & Body Product Manufacturing If your business also produces lotions, bath salts and scrubs then this may be a better code to use.
NAICS codes for candle makers
Candlemakers are unfortunately not well represented in the NAICS codes, so it’s a case where you’ll need to find a best fit given the options available. These are:
424990 : Other Miscellaneous Nondurable Goods Merchant Wholesalers _ This one is good for those that mainly sell their candles wholesale and do not manufacture their own candle range._
453998 : All Other Miscellaneous Store Retailers (except Tobacco Stores) If you mainly sell your candles retail, you can consider usinh this code. It isn’t a manufacturing code, so you’ll want to avoid this one if you are a candlemaker and use the code below instead.
339999 All Other Miscellaneous Manufacturing Candles manufacturing This default NAICS code is recommended in the NAICS search for candle products.
NAICS codes for clothing and fabric makers
If you make clothing for a living, your subsector is usually 315 (Clothing Manufacturing). This means that your NAICS code will most likely start with 315.
There are many codes for this industry - see our detailed list of the most common NAICS codes you can use for your home based handmade clothing business.
NAICS codes for potters
These NAICS codes are great for handmade sellers that mainly work with ceramic and clay-based products.
327110 Pottery, Ceramics, and Plumbing Fixture Manufacturing Sculptures, architectural, clay, manufacturing This code is new for 2022, and covers businesses that produce ceramics or manufacture products made of clay
Old NAICS codes that no longer apply:
- 437100 : Ceramics, Manufacturing Clay Products
- 327100 : Clay Product Manufacturing
NAICS codes for leatherworkers
316992 : Women’s Handbag and Purse Manufacturing This NAICS code is for the manufacturing of women’s handbags and purses of leather or other material
316998 : All Other Leather Good and Allied Product Manufacturing Manufacturing of wallets, purses, billfolds, keycases, luggage, shoe soles, watchbands and dog furnishings (collars / leashes / harnesses / muzzles)
NAICS codes for woodworkers
Most woodworkers fall into the 33243 NAICS code, which is “Sawmill, Woodworking, and Paper Machinery Manufacturing”. According to SICCODE, there are 513 companies verified using this code.
Other codes to consider as a woodworker are:
- 321200 : Veneer, plywood, and engineered wood product manufacturing
- 321900 : Other wood product manufacturing
NAICS codes for yarn makers
13110 : Manufacturing Yarns and Thread This NAICS code should be used if you make yarns for resale (i.e. you don’t purchase yarn to produce a garment, you make the yarn and thread for sale)
NAICS codes for bakers
311811 - Retail Bakeries This code is retail, but also denotes that there is an element of manufacturing involved
NAICS codes for cannabis CBD manufacturers
If you have a business that mainly makes products out of cannabis, your NAICS code or Business Activity Code will be:
325411 – Medicinal and Botanical Manufacturing
“This code is for Manufacturing uncompounded medicinal chemicals and their derivatives (i.e., generally for use by pharmaceutical preparation manufacturers) and/or Grading, grinding, and milling uncompounded botanicals”.
Some other codes that may be relevant to CBD products are:
- 311812 – Commercial Bakeries
- 311991 - Perishable Food Manufacturing, or generally;
- 424590 – Other Farm Product Raw Material Merchant Wholesalers, including Marijuana Merchant wholesalers
If you are going to use a manufacture code for your business, you may need to also select a retailer code in some cases when dealing with state and federal agencies to describe how you sell your products. The two common ones to use here are:
454111 : Electronic Shopping If you only sell online, this is the code to use.
454390 : Other Direct Selling Establishments If you sell only at market stalls and other temporary venues, then this is the most appropriate code to use.
Can’t find a NAICS code that fits with what you make? Take a look at the entire list here: NAICS Search or ring your local tax office.