Do you believe in always telling the truth to a customer or do you think the facts should be restricted to need-to-know basis?

There is no easy answer for this, there is no one size hat that fits all.
After saying that, I will say this, One should NEVER lie.
But I read somewhere that One should also not volunteer for information.
Answer truthfully what is being asked and show the broader picture if that helps someone in making their decision but don't lie.
Lying is ethically, morally and professionaly wrong and the consequences are always dire once you get caught and you will always get caught, it just a matter of time to when.....
Honesty is the best policy but keep your cards closer to your chest, if you know what I mean.

A Sales personnel should have brilliant communication skills.
He/She should has the ability of telling the sour things in a sugar coated way.
Telling blunt truths could never be a good practice even in your real life specially in your family matters.
If the truth is something which can be presented proudly, no problem go ahead, otherwise telling should be in an artistic way.
I always say Selling or Marketing is not just a profession or something similar but it's an Art.
This art includes a sub-category of effective speaking.
This effective speaking would give you the ways to present an unacceptable Truth in an acceptable way.
Conclusion is; Tell the truth even if its not good because telling an unacceptable truth is a challenge and challenges are the beauty of Sales.
:) I would always suggest sales people to do extensive homework for every possible question they can face, specially where this kinds of truths are involved which can make your potential customers a little reluctant.
Example: 1.
You are selling a Personal Computer which has an option of little less built-in memory than other similar systems in Market.
But same time this system has a capability of extending the memory to a very high level.
2.
You should emphasize on the capability of extending memory to a higher level, instead of the current memory offered.
The example of using *stars* for the word conditions apply, or the usage of word "As Low As" with the lowest offered prices are the similar things where you just move the eyes from actually problematic point and reduce the possible level of reluctance.

Truth is the foundation for cdedibilty.
So I would say you should always tell the truth.

actually yes i believe in that because it will make the customer know that you are honest and he may buy another product of what you are selling because of your honesty and the product he didn't buy will has another buyer will buy it with its defaults even if he know what's wrong with it