I more or less agree with Jbatlanta that the time and effort you spend trying to recover will probably not be worth what you're likely to collect.
However, if you want to pursue the matter, I agree with Bigkidz to first file a small claims action against the seller. That assumes that your state's small claims court has a procedure for suing someone located out of state. A small claims court judgement agsinst the seller might strengthen your hand in dealing with UPS, because their "shipper" now indisputedly owes you money related to the shipment in question. Your position would be that, because UPS owes the seller and the seller owes you, UPS can and should pay you directly.
If UPS doesn't respond, the next step would be to take UPS to small claims court. Your argument would be same as stated above. Of course, you should mention that the seller is out of business, so the court knows you have no recourse in that direction. You should also emphasize that if UPS doesn't pay you, it will end up keeping the money because the out-of-business seller is never going to make a claim. That amounts to "unjust enrichment" of UPS. Courts don't like unjust enrichment where a party clearly owes someone, yet gets to keep the money because of a technicality.
Technically, UPS still has a defense, but judges in small claims court often overlook technicalities. The judge might also lean in favor of enforcing the rights that the court already established in your first action against the seller. UPS' refusal to pay has the effect of frustrating the legal rights the court previously granted you.
Good luck whatever you decide to do.