It is true that the free shipping does not apply to video games or consoles, but I also used the $5 off coupon to cover the shipping. I'm in MI and did not pay sales tax either. You are not purchasing it from Toys R Us, but from Amazon Toys, LLC, or something like that. So, they must have formed a separate company to handle toys sales with the advantage of no sales tax in most states.
I bought this for my kid for Christmas, so the Mario Kart game is perfect, in fact, it is the game I was going to buy anyway. In the end, it ends up about $20 cheaper than any other deal I could come up with. If you don't like the game, but put it up on Half.com, etc., and you still end up ahead. The unique color is cool, but too bad it has the Toys R Us logo on the front of the machine. I can't wait to get it just so I can play with it before Santa has to wrap it up.