This sounds like a fairly standard transaction. Each State will have its own book of values for vehicles. This is to prevent buyers from avoiding sales tax by constructing sham transactions at very low purchase prices.
Got a ton of flack, mainly because of parents “selling” cars to their kids for $1 - and then being hit with full value sales tax.
And that is exactly why states started doing this and it is nothing new, this has been SOP for a long time. Most states base the sales tax on the fair market value and not on the actual sales price because too many people were playing the system by doing these $1 transactions between friends and relatives or buying and selling used cars for an on the books transaction for a lot less than the car was actually worth with the difference being paid under the table in cash or purchasing cars from states with no or much lower sales tax. FWIW, this falls under “Use Tax”.
I live in PA with a 6% sales tax. If I drive to DE a state that has no sales tax or to a state with a sales tax of less than 6%, and I purchase, clothes, furniture, household goods, electronics, alcohol, anything and bring those times and use them in my PA residence, technically when I file my PA income tax return, I’m supposed to claim those purchases and pay the Use Tax on the difference. The same applies to on-line purchases. Do most people do this? Probably not. Are you “supposed” to? Technically, yes. Most people do not claim or pay Use Tax because it’s not likely they will get caught for not doing so. Car purchases OTHO get you because of the necessity to register and license the car in your state of residence.
I understand that if you move from one state to another and your car was purchased more than six months previously, when you register the car in your new state, sales tax does not typically apply but it varies from state to state. Some, but not all states provide exemptions for active duty military personnel.
If your car was purchased recently (less than six months for example) or you purchased a car out of the state of your residence, you typically pay the difference in what you paid in sales tax with proof the tax was paid, to your previous state of residence and the sales tax of your new state of residence based on the FMV. This varies from state to state and some states will tax you regardless, but often you can file a form proving that sales tax was paid to the previous state, claim a credit for that against any sales tax levied in your new state and if necessary, file a form that substantiates that your car is well below their estimated “blue book” FMV.
But granted, this is a PITA.