Lots of small businesses do "cash no tax". It's not forgotten when it's spent. I've fixed my car in cash (primarily to save on tax; and to not have it known by insurance). It's hard for one to "amnesia" $5000 in cash. It's a tool, just like a credit card.
I've never seen anyone do this. But, unless the small business is committing fraud, they are then eating the tax. I don't a small business is going to willing pay 10% (or whatever the tax is)
I sometimes saw my dad doing this in Britain, where it is certainly tax evasion. He'd ask the price of a service, then ask if there was a discount for "cash in hand". Occasionally, I think tradesmen would offer both prices upfront, or say "will you be needing a receipt?".
It would have been a 15% discount for my dad (VAT was 17.5%), and probably a slightly larger saving for the tradesman, although they have a higher penalty if somehow caught. I think it was usually done for small jobs, like minor plumbing fixes.
I have no idea how common this was in the 1990s, or how common it is now.
Yes, and recently legal/not penalized for all credit cards in the US to advertise cash price and automatically add a fee for credit card purchases that is lightly advertised at point of sale
Someone else can come behind me and cite the court case/credit card guidance
Yes, it's generally legal to apply an additional surcharge on card transactions beyond the cash price, thus making it appear as if the sales tax is being removed. It's all above board as long as the full value of the sale is reported and taxed (exact details vary by tax code, of course).
It's generally illegal, however, for a business to evade taxes by failing to report the full value of cash sales. It's also legally dubious as a customer to knowingly help facilitate such transactions (e.g.: anti-laundering laws)... but I don't think it's common to catch heat for this if you're an otherwise law-abiding person.
