From ToEE

From time-to-time the party may encounter artifacts created by the forces of evil. Some of these will be wrought from silver, gold, jems, ivory, and other precious materials. These make great loot, but there's a small hitch. These artifacts may still be possessed with evil magics, and selling them on the open market isn't going to be doing the forces of good any favour, especially as many carry curses or may attract undue attention from the forces of evil. Selling them to the forces of evil is even worse.

If you're a Paladin or good cleric, then allowing the blood-stained, ivory and gold idol of Yub-Suggaou, devourer of children, to remain intact isn't going to score you any brownie points with your deity. Smashing it into itty bitty pieces and dropping those into acid is going to give you a warm inner glow, but it's not going to pay the bills. Especially if you have to pay for the acid.

So, the deal with evil artifacts is as follows. If you're of good alignment, and you sell, distribute, or even leave intact an evil artifact, then your alignment will drift. If you're a paladin or cleric (or to a lesser extent, a ranger) that may mean loss of powers. If you're a magic user or fighter, you may feel bad. If you're a thief (unless you're a good thief), then you probably don't give a damn -- you stole it, you should profit from it. The more evil and nasty the artifact, the more your alignment will drift, and the more shirty your deity will become with you.

Neutral characters won't care if artifacts are destroyed or not. Evil characters will want artifacts of good destroyed instead.

Luckily for those wishing to make a profit, you don't need to actually destroy the artifact to satisfy your alignment, you simply need to make it un-evil. Some artifacts will lose their power when removed from their shrine or evil surroundings, whereas others may require more work. In extreme cases, you may need to go on a quest to remove an item's evil, or melt it down, or smash it into itty bitty pieces and drop those into acid. If this is the case, then tough.

Examples of evil artifacts may range from holy symbols up to immensely powerful creations lost in the mists of time. The DM will probably let you know if something is considered an evil artifact. How you can remove the evil from these items is something you'll need to discover yourself, but common sense is a good start here.

If your alignment changes due to your actions, you automatically lose a level. Gary says so.