I'm more in favor of getting rid of income tax vice getting rid of sales tax.
However, to answer how this is the "free market at work" --
In states that are more "free" say comparing South Carolina, to California....businesses are free to move to states such as South Carolina where products are not priced higher via tax in order to pay for entitlement programs and "high-speed" rail to nowhere. This is the free market. It would also aid in forcing stupid states to stop spending money unwisely so they would be enticed to lower taxes in order to compete with lower taxed states.....This is the free market.
California is free to tax products sold in their state however it wants. South Carolina is free to tax products in their state however it wants. However, trying to tax out of state purchases is akin to tariffs between the states and would be "interstate commerce" in its truest sense (vice the garbage infringement Kongress attempts to call it) and should be regulated as such....ie, there should be no taxes at the state level for items sold across state lines.
South Carolinians purchasing items from California via the internet should not pay either SC or CA sales tax. Neither should Californians purchasing items via the internet pay either CA or SC sales tax. This would be equal application under the law and your "free market at work."
Now, if you really wanted to be "fair" and have a "free market"......we would end taxes on productivity (income taxes both state and fed) and implement a Fair Tax on consumption (state and fed sales tax) that were applied evenly to all end user goods and services (yes; food and clothes too - this prevents lobbyists from determining their product is "essential" but not others).
Taking one unfair policy or tax and implementing another to counter it is not fair, the free market, nor a conservative principle. I didn't vote for New Jersey's stupidity because I don't live there..........don't make me pay their damn taxes.
And to further complicate matters, not all sales taxes are created equal. Here in Michigan we have a 6% sales tax and some states have no sales tax.
No one is asking you to pay New Jersey's taxes. An internet tax would apply the sales tax of the state in which the purchaser sits. If you're in SC, and you buy over the internet, you pay no tax, just as you would pay no tax if you walked down the street to purchase the same good. So, in competing for your business, the out-of-state internet company gains no artificial benefit.
Likewise, if you're in NY, and you buy something over the internet, you would pay NY tax, just as you would if you walked down the street to buy the same thing. Again, in competing for your business, the out-of-state internet company would gain no artificial benefit (as they do currently).