Does knowing many scales help figure out how to play entire songs by ear easier? Im just wondering because Im in a little confused state of whether I should learn songs by ear or just use tabs instead? So any advice would be helpful.

knowing common scales and progressions helps you to have an educated guess at the songs, then just tidy up the accidentals and added flavour notes by listening again, generally these notes lie within the key(scale) aswell, so yes it helps to know them.....

this is my view, maybe you do it differently though
Quote by Bubban
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Well, you don't need it.
But unless you're Chuck Schuldiner, I'd advise you to learn your theory.

It's really useful.
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I would use it as a practice to train your ear. I wouldn't learn all my songs by ear, only as a practice thing.
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What he said^^. Theory will be really helpful if you try to write music also.