The Dallas TV station says the Dollar Tree assistant store manager wouldn't comment on camera about the excessively star-spangled banner, but said the flag is sold as a "patriotic banner" — not as an American flag.
Per the United States Flag Code, the US flag should not be used for "any decoration in general". It states that Bunting of blue, red, and white stripes, with the blue on top, can be used for decoration (read 'patriotic banner').
If it looks like the flag, it is a flag, and should conform to the design in the flag code. If it's not a flag, then it should look anything like the flag.
Incidentally, the flag code is a law (Section 1 of Title 4 of the United States Code), but you can't be punished for breaking it.
(Which is a shame, IMHO).