drush sql-sync doesnt extract gzipped sql
In Drush 6, the sql-sync command on the source system composed bash commands, and executed them on the remote system as needed via ssh.

In Drush 7, the sql-sync command on the source system uses drush_invoke_process to operate on the remote system. Drush 6 did not support the gzip features that Drush 7's sql-sync command requires.

You don't specifically mention if the system you are running sql-sync on is Drush 7 or Drush 8 or something else, but Drush 8 is substantially similar to Drush 7 vis-a-vis sql-sync implementation.

You should be able to use gzip to send sql dumps to @tmp.coe, but only if you use Drush 6 on the source. Drush 6 is no longer supported, but I believe it also supported transfer between two remotes. You should therefore be able to install Drush 6 on your local system, and perhaps name it drush6 and use it only for this purpose.