I see thoughtful pagan-leaning parents asking for advice on how to talk about Santa a lot this time of the year. We want to be honest with our kids, but then what about holiday magic??? Well, I'd like to offer a 3rd, less dualistic explanation to offer the kiddos, and ourselves:
Spirits are real.... and thus, so is Santa, but not in the conventional tangible sense. We must leave room for mystery and faith.
In my family spirit offerings are made more than once a day every single day of the year. We place them in the window, and on the altar. For example, in keeping with the animist Faerie Faith of our ancestors (that probably most closely aligns with what one might call a "religion," for me), every spilled bit of food belongs to the Fae, and must be offered back in sincerity. My youngest son is totally the master of crumb ceremonies. My children know that offerings are not physically removed by the spirits, but the spiritual essence of the offering is received, and after a day, the physical remains must be discarded with reverence. Offerings are a big deal in our family. It is central to my practice, and if nothing else, it keeps us in constant relationship with what is greater than ourselves.

By the time the winter holidays come around, it's quite a natural idea for my kids to make a binding yule contract with a winter spirit such as Santa, or to offer him cookies no one expects him to actually eat. It's also quite natural to explain and to understand, that Santa does not physically come down the chimney, but instead works THROUGH parents, who invite him in when they facilitate Santa letters, and then engage in "performing Santa." I hold the idea of being "filled with Christmas spirit," to be rather literal. The dark days of the year are loaded with spirits. They're everywhere. If you invite one to your house, they're sure to come. If you do not hold this season with intention, they're also sure to come and create discord and havoc. I can distinctly remember stories of my extremely strict and stern grandfather being absolutely taken by the spirit of Santa every year. He would light up, even after I was born, and delighted in uncharacteristic and elaborate Santa shenanigans for his family. The Night Before Christmas was ritualistically read to the entire extended family by a child every Christmas Eve, with great reverence, and then he would come. That’s exquisitely ironic to me, as it is very much a story about a faerie visitation/sighting, and hours later adults possessed by the very visitor invoked by that delightful story, try not to bite each other’s heads off while they assemble dream bikes and block towers in the night.
So when my kids ask questions like, "is Santa real?" I can and have answered in all honesty:
"Yes! I think so, but not in the literal sense of him landing on our roof and coming into the house while we're sleeping to deliver actual presents himself. He's a spirit! Right? He doesn't have a body. He works through us. While many grownups these days do not believe in things they cannot prove or see, so they might tell their kids there's no such being.... they don't need to believe in Santa for him to work through them to make Christmas magical for their kids. He's real when they write Christmas letters to him with their kids. He's real when they generously go in search of the gifts they're going to sign his name on. He's real when they take joy in finding gifts, and watching their kids open them. He's real when people feel inspired to volunteer or donate food and gifts around the holidays. Summoning a spirit is summoning a spirit.... Santa inspires people to be generous and merry because they invite him to. That's magic."
This did not make my kids blink, but it did make them feel comfortable in knowing exactly what I believe to be true, and how Christmas magic really works. It explains why Santa won't be physically doing a B & E at anyone's house, and why so many adults are unable to believe in him or tell their kids he's fake news. It leaves room for the Great Mystery, and worlds unseen.
All that being said, at our house, we actually don't work with Santa. My littles aren't here on Christmas. We call upon Winter Witches for Yule instead. I'm divorced. We have a blended family, and their father is basically the phantom of the Opera. He is a composer and a world-class pipe-organist. He goes where the pipe organs are... churches. He's spent his entire adult life facilitating the ceremonies and rituals of various Christian churches through directing and performing their music, especially on sacred days. As such, my kids get the full Christian Christmas experience at dad's house. Christmas Eve service, Santa, nativities, etc. My educational background is in religious studies, and while I do not formally practice Christianity myself, I support all the ways humans have found to connect with Spirit, and I welcome the extra chances they get to gather with community in ritual and reverence. Like many of my ancestors, I don’t see Pagan and Christian holiday practices as mutually exclusive. That’s a more modern hyper-dualistic take that can’t be cleanly applied to history or the spirit realm. With me, they celebrate Yule and Winter Solstice. Each fall we make an offering to the Witch in the form of going through our stuff and finding things to let go of in the spirit of the season. Then we write her letters requesting a few gifts, and we burn them ritualistically along with Mugwort and Juniper, because burning things and creating smoke is the most direct way to connect with the spirit realm. Once the letter is burned, they can't change what they asked for. It's a contract! My own letter is usually a request for the means and the way to find what my kids have requested. I need all the help I can get. We make offerings to her, have a fire with a yule log, and offer her a plate at our yule feast. For the Winter Solstice I like to have everyone set intentions for things they'd like to increase with the light (and on the summer solstice, we set intentions for things or habits to decrease with the light).
And sometimes, just sometimes, a random gift I did not buy, and truly can't explain, will just show up. Some little thing... that we should not think about too hard, or stare directly at, because magic is not something to clutch with white knuckles. We let the wonder breathe and ignite our hearts.