The NPC Dealer's personally and bounty determines whether or not they are an undercover cop. If a dealer spawns with a 'traitorous' personality AND has no bounty on them, then they WILL try to arrest you when you sell to them.
This means if the Dealer NPC you encounter has any bounty on them, then they will always be a legit buyer, even if they do spawn with a traitorous personality. Bounty-less NPC Dealers can still be safe, but you will be taking a risk when selling to them.

This mod also changes how NPC Dealers spawn compared to the original mod. Smuggling Incorporated uses Faction Residency to spawn the dealers, which means they would spawn 100% of the time in the faction controlled towns. As a way to help balance this mod out, it changes the dealers from Residents to Bar Squads. They still behave as residents and will wander around towns, but they now have set chances to spawn in each town.
United Cities have a 90% chance to spawn a NPC Dealer
Holy Nation towns have a 50% chance to spawn a NPC Dealer
Shek Kingdom towns have a 25% chance to spawn a NPC Dealer.