I sold my sister a car a few years ago. Gave her a decent deal on the car but didn't give it away and then she had the same problem. Some idiot from the State called her and told here she owed more tax because the car was "worth a lot more than the bill of sale". She told them that the car is worth what I paid for it. I don't recall what happened but I think she had to pay some extra tax.

Basically it is the curse of the small time tyrant. Some people in small jobs try to inflict as much pain as possible.