http://revach.net/article.php?id=1425

Section: Halacha   Category: Tshuvos
Shevet HaKehosi: Can You Buy Something From The Taxman at a Public Auction?
If someones property is taken away by the tax authorities for taxes owed and put up for sale at an auction are you allowed to buy it?  The Shevet HaKehosi (4:307) says yes, you can. The basis of this question is the Halacha that it is assur to buy something from a thief since it promotes stealing and you are supporting and assisting sinners.  Therefore since nowadays the tax authorities operate in an evenhanded manner to all members of society with set rules they are not considered thieves.  Moreover the halachos of Dina D'Malchusa Dina apply and one is obligated to abide by the laws and pay taxes.

Even in countries where the authorities have no right to tax you (according to some opinions this may include Eretz Yisroel) and Dina D'Malchusa Dina doesn't apply, nevertheless you can purchase these goods at an auction.  This is based on the Chavos Yair (209) that says that you can't buy stolen items if this will prevent the thief from selling it.  Since in this case 1) it will be sold no matter whether you buy it or not and 2) the taxmen will confiscate it whether or not they end up selling it and 3) the owner certainly gave up hope already, for these three reasons you may buy it for yourself.

 Disclaimer: We try to convey the Tshuva to the best of our ability. We admit that our understanding may not be accurate. Please also understand that this Tshuva may not be the final word on this topic. One should consult a Rav before drawing any conclusions.