I can think of at least 2 reasons why Blu-ray hasn't succeeded. The first is that research shows that picture quality is less important if you are actually enjoying what you are watching. Interestingly, enjoyment isn't so much linked to the picture quality as the quality of acting/animation, the script, plot, etc... At the end of the day, we don't care that much about whether things are a little less sharp. Heck, that's part of the reason there's such a market for poor quality copies. If it's a good film, you're still going to enjoy the slightly grainy rip you bought from a dodgy guy on the street. If it's a crap film, it doesn't matter how good the picture quality is, it's still a crap film. I can hear people already saying "But you'll enjoy a good film more if the picture is better!" Meh... If I weighted all the factors involved in enjoying a film, picture quality would be weighted very heavily until the quality drops to the point where you can't really see what's going on.
Secondly, Blu-ray appeared at the same time as many of the online streaming services that are now becoming so popular. It's a matter of convenience. I know it's probably good for me to get out, get some sun, while I go to some rental place or shop. However, I have to pay per disc that way, as opposed to the flat rate I can pay Netflix. This also alleviates any thoughts that I may have wasted my money on a film I won't enjoy. Don't like that bad action film you're streaming? Stop it and find another... problem solved. No need to go spend more money and make another trip.
I agree there are many reasons why Amazon is successful without tax coming into it. That's one of the reasons I feel Amazon doesn't need the extra advantage of not having the charge sales tax. I realize that making Amazon et al. charge state tax won't level the playing field entirely (or even much at all), but it is one step to equalizing opportunity between physical and virtual retailers.
As has been noted by one or two other commenters, if you buy something from a company such as Amazon, you are actually meant to report it on your state tax return (under USE tax) and pay the tax on it. This regulation would simply keep people honest by charging them upfront.
A few points. I am well aware that prices online are cheaper already before tax. However, when you then add the tax at a brick and mortar store, the price difference is even greater making you even less likely to purchase at a physical location. Making online retailers charge sales tax will bring the difference back to the 10-25% you claim rather than ~20-35% for those states with the highest sales tax
You may fill in you USE tax however, why not just make everyone honest by making sure they pay upfront? Sounds like it wouldn't matter to you either way...
The one day you'd sell your soul for something, souls are a glut.