A temporary 1% state sales tax approved by voters in 2010 expired June 1 as scheduled after the failure last year of an effort to make it a permanent levy.
The tax rate drop to 5.6% from 6.6% is expected to lower revenues by almost $1 billion a year.
Gov. Jane Brewer asked for the increase in 2010 to avoid significant layoffs as state revenues dropped in the recession, and the proposal was approved at a special election in May 2010 with 64% in favor.
The tax is expected to have generated $922 million in fiscal 2013. Two-thirds of the annual revenue is dedicated to public education.
Local education officials said the loss of the sales tax revenue could lead to layoffs of teachers and school staff, larger classes, and the loss of some programs.
A measure to make permanent the 1% tax was put onto the November 2012 ballot through a petition initiative, but it was rejected at the polls with 65% opposed. Brewer opposed the Quality Education and Jobs proposal that earmarked 80% of the tax revenues to public education and the remainder to fund an infrastructure bond bank.