I suspect the "how" is that we just never got the regulation that would prevent it because the 'small-government and low taxes' are aligned perfectly with the large business interests which tend to fund all campaigns. The "low taxes" types want to maximize the sting of all forms of tax and this is a great way to do that. And the businesses appreciate the psychological benefits of being able to show the minimum possible number. Even if a "display only the final price" rule applied to all a consumer's options, we probably just buy things more when they're labeled as "$99.99" instead of "$109.99."

For extra fun, consider how phone bills attempt to "pass through" their own tax obligations, which have little to do with your own incremental usage, in the form of 'recovery fees' tacked onto bills. I suspect we'll eventually see those creep into all kinds of transactions, especially among other monopolistic/oligopoly businesses where you have little if any choice.