Use of alias result in Bad Destination Domain Address error?

I'm using sendmail 8.13.7 on a Fedora Core 4 Linux machine. This is an
internal server which I use to send mail from my various client application.
I use a Smart Host setting to have all outgoing messages go to my company's
real sendmail server.

I wanted to make use of aliases on my internal sendmail server to aid in
our testing work. I added an alias to the /etc/aliases file and ran the
newaliases command, which completed successfully.

WHen I run the local sendmail in address test mode, it seems to recognize
the alias:

> 2 root->> /usr/lib/sendmail -bv -v meh_test1@mehfc4
> meh_test1@mehfc4... aliased to my-email@my-company.com
> my-email@my-company.com... deliverable: mailer smtp, host mailserver.hq.my-company.com, user my-email@my-company.com

When I tried to send an e-mail message to my alias at the internal server,
I got an error mail message back from the company's mail server, complaining
that the domain address was invalid.

It looks like the alias address (meh_test1@mehfc4) was getting passed to
the smart host.

Is this how it works, does the smart host happen before the alias replacement
does? I've looked around and was unable to find anything to tell me one way
or the other.

Thanks for any pointers.