Yes. If the stolen tag is present on your tool, it is unsaleable. It may change to be more "developed" in the future. - For instance if the reputation system that's been whispered about from fan to fan, were implemented, A customer may not only refuse to take the item, but may report you for stolen goods (lower rep) or notice that its stolen, and walk out immediately (double lower rep) (They'd get offended that stolen goods were offered, and that'd cause you to not sell to them, and not selling to them is the primary rep "dinger" that has been mentioned with this suggestion)
you can craft with them, and you personally can still use them, by your own choice, ignoring the stolen tag, but nobody else except Geoffrey will take them.
As for Geoffrey, I think Stolen still counts as his spawns and not your items, so if you carry it back into his shop, I believe he not only charges you for stealing, but then deletes it as the shop respawns its selection.