Paypal issue beware.

Recently, I just went through this WHOLE THING with eBay & PayPal and can describe the process. I'll try to explain this briefly...  I do not carry a PayPal balance, and have been using my account since the x.com days, so I've seen a few scams.  I sold a TV speaker on eBay advertised as NEW.  The buyer made a claim saying it was missing a part.  I fought the dispute and won.  Buyer then files a dispute with PayPal by issuing a charge back.  Note: the person is the problem, not PayPal.  Now in my case buyer paid with a credit card, so it may be different if the buyer used a bank account or PayPal balance.  Now PayPal immediately withdrew the transaction amount (by law as OP stated) + a pesky $100 charge back fee, which I fought and got waived.  The buyer does not have to return the item.  The buyer does not have to prove anything.  The seller can only give their side of the case to PayPal.  PayPal will fight vigilantly on your behalf.  However, there is a mandatory 75 day waiting period.  Since I do not typically carry a PayPal balance, after 21 days I still had a negative balance and started getting nasty emails.  After another week or so, I could no longer call PayPal to discuss and would be immediately be transferred to collections.  After 37 days, I think it would appear on my credit report so I paid the negative balance.  At this point, all you can do is wait.  9 out of 10 cases are won by the buyer, mainly because the seller wasn't prepared to fight with proper documentation.  If you lose, your best recourse is small claims court.  In my case, I was fortunate and won and winning the eBay dispute certainly helped.  It's a risk to sell in the sense that credit card companies view you as a store that should always accept returns for whatever reason, but that is not true as most people do not operate as such.  Understand that PayPal is not a bank, they are merely a payment processor, so if you sell a lot, get seller protection from them.

Pay Pal is the worst.  
They are a 3rd party vendor who Leaches off actual processor systems.Their entire business model is to contract with the actual processors and throw their service fees on top and pass that all off on their customers.
They market themselves as being a safe but most of all fast. Every one likes fast until there is a problem. When there is a problem they pass that off their customers as well as long as they can get away with it.  To actually fix a problem takes time, resources and money which they do not want to deal with. 
To fight with them you have to be prepared to get Nasty. You need to demonstrate that you are not going away and that if need be you will bring an army of resources to conduct your own investigation into their business practices.
I had a similar problem with them several years ago and they were giving me a the whole run around as to their investigation policies and why they were justified in sticking me with the loss. I had to threaten to sue them, not in small claims, but to get the US attorneys office to conduct an investigation since this would constitute Mail and Wire Fraud which is a federal case. I also pointed out that if they were doing this to me they were probably doing this to thousands of accounts a day which probably translates to Hundreds of millions a year, which would most likely prompt a class action suit  -
They reimbursed me the Next Day. I never used them again. 

I have stopped using PayPal as a method of receiving funds from sales.  I received payment by a "PayPal cheque" in my last transaction and it took PayPal 10 days to clear.  I could have got a Cert. Cheque or Bank Draft through normal mail twice as fast.  PayPal had the use of those funds during that period and they charged me 3%.  Ridiculous.

I now use bank draft or e-transfer.

lot of good info .  Quite startling to consider that PP can refund $ to buyer  without setting up a process whereby seller will get the item back.  I would of not believed that could happen until I read it here.   I have had reasonably good luck using PP over the years selling here primarily.   They did not back me re/a pair of factory boxed speakers that a buyer had claimed were damaged in shipment.    UPS was contacted after delivery and denied claim despite excellent factory boxing that even included a factory custom made particle board cover for the drivers in addition to the complete envelopment of the speakers with 3 inch styrofoam slabs .  Re/this damage-- I had speculated that drivers were damaged because of g force of the boxes being slammed with the driver side of the speakers  taking the full force thus distending cones out.  This being the result of a disgruntled driver tired of attempting delivery and not finding buyer there..  I find  a critical piece of the process is that a buyer HAS to follow a protocol that maximizes the potential for a successful delivery.     Not being there for 3 attempts is really unacceptable.     Although then this came up in my investigation .    Statements from both Decware speaker maker and the  speaker driver maker indicated that the driver damage was due to DC current from a faulty amp.  PP ignored  statements from the vendors as to the potential of buyer caused damage.  I saw all the pics of boxes,  etc with no visible damage to boxes or speakers other than driver damage.   UPS would only refund for shipping.  PP indicated that I needed to compensate buyer for repair.    At any rate--  I Have had best service with FEDEX over the last 16 years  and do not recommend UPS .   And now will consider what I can do to limit or remove my affiliation with PP.   

I can understand frustrations on the part of sellers regarding PayPal seemingly being a bit deaf when it comes to unscrupulous buyers, but on the flipside when I'm buying something I prefer PayPal because I know they will protect me from an unscrupulous seller.  Allowing payment via PayPal opens the doors for many more buyers to consider your item. 

I would never purchase something where a seller mandated I pay via cashier's check, money order, bank draft, or some other method where I didn't have recourse in case the item arrived broken or not as described (though I am fine paying in cash for in-person transactions where I can inspect and test the product before payment changes hands).

I have also noticed a number of sellers here who do accept PayPal stipulating that the buyer is responsible for covering the PayPal fees.  That's explicitly against the PayPal terms of service.  Buyers are not allowed to impose surcharges for items that don't apply to all other forms of payment.