So why can't it apply the same way to online merchants? Where their business is located?
You obviously don't run an online store. It's not as easy as just charging them tax. There are so many different tax rates (that are constantly changing btw) that it's going to be very difficult for any small retailer to keep this up-to-date.
It would be much easier to just require the customer to claim it on their tax forms (which I believe is already a requirement).
To claim this is "lost revenue" is about the same as when the RIAA claims piracy is lost revenue.