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Unfortunately, they can legally hold your vehicle IF they had a valid reason to tow it in the first place. They can make you show ownership, but law, so that they know that the right person has come to pick up the vehicle. They can even make you pay storage fees to get the vehicle out of the impound lot.
The tow company can go through a court process wherein they sell your vehicle as well.
The issue here is whether they possessed the vehicle legally or not. Based on what you have shared with me, if you have not received a citation, then they may not legally have the right to tow in the first place.
If you can, have an attorney contact the law enforcement to see if there are any charges. You can then make a decision as to how to proceed from there but you will know if there are charges that it was likely legally towed.
Let me know if you have any other questions or comments. Please rate my answer positively as well.
Did you have any other questions or comments? I want you to be as comfortable as possible as you move forward in this situation. Thank you.