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 codes for your craft.
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.
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.
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.
NAICS for handmade sellers
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).
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.
Tip: Don't use the 999999 code if you are feeling overwhelmed with the choices - this indicates to the IRS that you may need further investigation to find out what your true industry is.
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.
Pottery / Ceramics
437100 : Ceramics, Manufacturing Clay Products
327100 : Clay Product Manufacturing
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.
Clothing & Fiber Industries
If you make clothing for a living, your subsector is usually 315 (Clothing Manufacturing). This means that your 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.
316992 : Women's Handbag and Purse Manufacturing
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)
321200 : Veneer, plywood, and engineered wood product manufacturing
321900 : Other wood product manufacturing
13110 : Manufacturing Yarns and Thread
This 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)
311811 - Retail Bakeries
This code is retail, but also denotes that there is an element of manufacturing involved
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 code that fits with what you make? Take a look at the entire list here: NAICS Search