My parents's didn't. They told me and all of my siblings that Santa was like Bugs Bunny.
We all understood that Bugs Bunny was pretend, but we still loved him. Likewise, with Santa. I didn't lie to my children, either, yet they still enjoyed Santa and Christmas.
I've never understood the logic of lying to children for such a frivolous reason. Lying is something that we normally discourage, but it has become culturally acceptable to lie about Santa. I don't get it.
I've never believed in Narnia, or Middle Earth, or in Thumbelina, but I enjoyed them just as much.