Since you did it through eBay: was it in the listing that refunds would be minus shipping cost? If not, well... probably going to have to refund the shipping cost. If you didn't actually have a listinglisting and you're saying you just used PayPal to ship... Hm. It would kind of depend. I would try calling USPS with the tracking number to find out more about it. If it was something you messed up on, yeah, you should probably refund.