I don't know what prevents dishonest merchants from undercounting their cash. Other merchants would have no idea whether another merchant undercounted or not, I doubt that their receipts are made public. I certainly have no incentive to report what I have purchased, but even if I did, the merchant could pay enough sales tax to cover that.
It appears to be a non-problem except for someone (government official) looking for a fishing expedition. Therein lies the greatest potential for abuse, IMO.
A better possibility is that they track inventory either from the distributors or at the market itself. With a high tax, there will be a great incentive to track it from the distributors since they can force them to either remit sales tax or remit records of buyers.
Distributors would have no sales tax to remit and reporting who purchase from the distributor is intrusive, opening potential for abuse and fishing expeditions. On the whole, percentage wise, business owners are more honest than government officials. Just look at who produces the goods and services that people need for survival and you won't find government on that list -- save for protection of individual life-and-property rights from domestic and foreign criminals. ...Valid government services.
Some people on this thread say that's not necessary but I see it as a distinct possibility. And it still doesn't address the people who make what they sell.
It is possible but the probability is decreasing as the pendulum swings with increasing momentum to exposing government abuse and upholding individual life-and-property rights. Addressing the people who make what they sell; are you honest because of threat of government stick or your character development? In light of the honesty/pendulum advantage people -- buyer and seller -- become increasingly repulsed at conspiring to cheat the sales tax. Honesty begets honesty as sure as voting for the lesser of evils begets evil.
But obviously relying on honesty makes more and more sense as the government earns more respect from everyone. But there will also be the potential of abuse in both directions, merchants underreporting sales and government agents abusing merchants in search of higher revenue. It will take constant vigilance to prevent both.