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.