Handmade sellers often struggle to choose a correct NAICS code. Etsy sellers search for a clear answer but discover many options that look similar. The right code matters because it defines your business activity for tax forms, business registration, inventory tracking, and financial reporting. A wrong selection can create confusion in your books and raise questions during audits.
This guide explains NAICS codes in simple language. You will learn why these codes matter, how they work, and which ones fit the most common handmade categories. You will also learn how to choose the best code when you sell multiple product types. The goal is to help you file with confidence and understand your classification as a handmade producer.
What NAICS Codes Mean for Handmade Sellers
NAICS stands for North American Industry Classification System. It groups businesses into coded categories based on their primary activity. A handmade seller who creates products from raw materials fits a different category from a seller who resells finished goods. A seller who works with clay fits a different category from a seller who makes soap or jewelry.
Your NAICS code affects how your business appears in federal and state records. It also shapes expectations around cost of goods sold, inventory methods, and revenue patterns. Handmade sellers often operate in two broad categories. Some fit the manufacturing category because they transform materials into a new product. Others fit the retail category because they sell finished goods without producing them.
Handmade sellers usually fit the manufacturing category because they create new products from raw materials. This choice aligns your business with the production process that you perform each day. It also supports proper reporting for components, supplies, inventory, labor, and other production-related costs.
Why NAICS Codes Matter for Etsy Sellers
NAICS codes influence how your business gets understood by tax authorities and financial systems. They guide accountants on what cost patterns to expect. They also shape your inventory structure and your reporting process in bookkeeping tools.
Here are the reasons why NAICS codes matter.
- They define your primary business activity.
- They inform tax authorities about the type of expenses your business should show.
- They help track income and expenses in a structured way.
- They support proper inventory valuation for handmade production.
- They create consistency across registrations, licenses, and tax forms.
A correct code signals that you work with raw materials. It shows that you carry inventory. It also shows that you incur production costs before generating revenue. The IRS uses this information to compare your business with similar companies in the same category.
Retail codes work when you buy and sell products without modifying them. Manufacturing codes work when you produce items. Handmade sellers almost always fall under manufacturing because they transform materials into saleable goods.
Most Common NAICS Codes for Handmade Craft Businesses
The list below includes the most common NAICS codes used by handmade sellers, Etsy shop owners, and small creative businesses. Each code includes a simple explanation and common use case.
339999 – All Other Miscellaneous Manufacturing
Use this when you make a wide range of handmade products that do not fit a specific category. This code works for creators who offer mixed items such as home decor, art pieces, candles, accessories, and more. Many sellers choose this because it covers varied handmade production.
339910 – Jewelry and Silverware Manufacturing
This code fits jewelry makers who create pieces from metals, gemstones, resin, beads, wire, or clay. Use this when you fabricate jewelry rather than resell pre-made pieces. It also applies to silverware and other metal accessories.
325611 – Soap Manufacturing
Use this when you produce bar soap from oils, lye, botanicals, and additives. This code is ideal for sellers who specialize in handcrafted soap bars.
325620 – Bath and Body Product Manufacturing
This code fits sellers who create lotions, scrubs, balms, body oils, bath salts, and other self-care goods. Choose this when your shop focuses on bath and body products beyond bar soap.
327110 – Pottery, Ceramics, and Clay Manufacturing
Use this for handmade ceramics. It covers pottery, mugs, bowls, vases, planters, and sculpted clay art. It fits both functional ware and decorative work.
316998 – Other Leather Goods Manufacturing
This code suits leather workers who create bags, wallets, belts, straps, covers, cases, and accessories. It works for stitched and hand-tooled leather.
315990 – Apparel and Accessory Manufacturing
Choose this if you produce handmade clothing or sewn garments. It fits custom dresses, knitted items, fabric accessories, aprons, and children’s clothes. It applies to small-scale apparel makers who design and produce goods themselves.
454110 or 454111 – Electronic Shopping and Mail Order
These codes describe online retail operations. They apply to businesses that sell finished products through online channels like marketplaces or personal websites. These codes suit sellers who act primarily as retailers rather than producers.
454390 – Other Direct Selling Establishments
Use this when most of your sales come from markets, craft fairs, pop-ups, and physical events. It works for sellers who depend on local craft circuits or vendor events.
448310 – Jewelry Retail
This code fits sellers who sell jewelry but do not produce it. Handmade jewelry creators should choose manufacturing codes. Use this when you purchase finished pieces and resell them.
459990 – All Other Miscellaneous Retailers
This code works for sellers who operate mixed retail shops and cannot find a clear match in other retail categories. It is a retail option for sellers who buy products and sell them unchanged.
How to Choose the Right Code for Your Handmade Business
Your primary business activity should guide your choice. Ask yourself one question. Do you make products from raw materials? If you do, then your business falls under manufacturing. This means a manufacturing code describes your work more accurately. It also supports your production workflow, your cost structure, and your inventory system.
Choose a manufacturing code when your workflow includes these points.
- You buy raw materials.
- You create products from those materials.
- You maintain inventory.
- You track cost of goods sold.
- You use materials and labor to produce each item.
Choose a retail code when your workflow includes these points.
- You buy finished products.
- You sell them without modification.
- You do not create or manufacture goods.
- You operate like a merchandise retailer.
Mixed shops should choose the code that reflects the product category that generates the most revenue. For example, if you sell jewelry, soap, and home decor but jewelry brings in most of your income, choose the jewelry manufacturing code.
Some sellers choose 339999 when they produce a variety of items that span multiple categories. This code offers broad coverage without being too vague.
Avoid using unspecified codes because they create uncertainty during tax review. Choose a clear category that describes what you make or sell.
Insights From Seller Communities and Forum Discussions
Handmade sellers often share similar advice in online communities. They point out that handmade work usually fits manufacturing because creators transform materials into new products. They also note that retail codes do not match production activities. They do not reflect the cost pattern of crafting, which includes raw materials, labor, and inventory.
Creators also highlight that selling online does not automatically make you a retail business. Online platforms act as sales channels. They do not change the fact that you make goods. Several long-time sellers share that they switched from retail codes to manufacturing codes once they learned how NAICS works. These sellers report cleaner bookkeeping and clearer cost reporting after the change.
Many discussions also repeat a simple rule. Choose the code that best describes the activity you spend the most time on. Production defines your business, not the place where the sale happens.
Common Mistakes When Choosing NAICS Codes
Handmade sellers often make predictable mistakes when selecting a code. Below are mistakes you should avoid.
- Choosing a retail code because they sell online.
- Choosing an overly broad code that does not match production.
- Using unspecified codes that create confusion during audits.
- Picking a code based on style rather than your actual workflow.
- Mixing retail and manufacturing codes across different registrations.
Your NAICS code should reflect what you do daily. Production defines your role as a manufacturer. Retail codes describe businesses that do not create goods.
Final Guidance for Etsy Sellers
Your NAICS code is your business identity. It shapes how your records appear in tax systems and how your finances get interpreted. Handmade sellers usually fall under manufacturing because they turn raw materials into finished products. Retail codes fit resellers who buy products and sell them without changes.
Review the codes listed in this guide. Match your primary activity to the most specific code. Mixed sellers should choose the code linked to their highest earning category. Use 339999 when your handmade work spans many categories and no single code fits.
A clear NAICS choice supports smooth filing, stronger bookkeeping, and a clean financial structure.
If you want, I can convert this into a shorter guide, a comparison table, or a “best code by craft type” chart for your blog.
