Is it permissible for the poor and the needy to take goods distributed by the municipality employee, knowing that these goods were taken unjustly from street vendors?

A Muslim's property is sacred and it is not permissible to take it without a just cause. Even if the poor and needy know that the money was taken unjustly, it is not permissible to accept it except in extreme necessities. As for those who are unaware of its status, there is no blame upon them, and the sin rests with the usurper. Scholars have differed on the permissibility of ta'zir (discretionary punishment) by seizing property. The majority prohibit it, while Ibn Taymiyyah and Ibn al-Qayyim permit it, citing actions of the Messenger of Allah, peace and blessings be upon him, and some of his companions.

If the municipality takes these items out of consideration for the public interest and to prevent vendors from using certain places, then this is not injustice, but rather a legally permissible ta'zir, provided they rely on a credible fatwa. It is preferable to treat these items as usurped property and belonging to their owners, as a precautionary measure and to avoid disagreement.