Question (posted by @Tyrone MacStiophain): Buyer is new to eBay and didn't enter his apartment number with his shipping information. So, the sport coat I sent to him was undeliverable, and the tracking info says it was returned to sender--but the tracking info stops at that.
I haven't seen the package, and have no idea where it went after Palo Alto. Maybe it's still there, maybe it came to my ****** apartment building and someone stole it ... who knows?*
Buyer says he'd be happy to pay for shipping back to him, or wants a refund. Do I have to just eat it and give him a refund? He hasn't bugged me about it at all while I've been waiting for the sport coat to come back, but I'm sure the shoe's gonna drop.

Answer (posted by @dadjeans): You don't have to give him a refund. Since you shipped to the address provided you'll be covered if an eBay case gets opened. PayPal will more than likely side with you too if you haven't gotten the item back and there's no proof that it was returned to your address.
You're probably best to get in touch with USPS to find out what the hold up with returning the package is and send the buyer a message to let them know you still don't have the package back. Regardless, you're under no obligation to return his money.
My understanding is that, in the case of an item not received dispute, PayPal will only refund the buyer from the seller's account if the seller is in possession of the item.
I had a similar case three or four months ago where the apartment number was missing from the buyer's address and they opened cases on both eBay and PayPal before I could pick the returned item up from the Post Office and re-ship. eBay sided with me immediately. PayPal sided with the buyer but reimbursed me for the shipping charges out of their pocket. When I called in to complain I was told that if I wasn't in possession of the item I could have kept the money and they would have reimbursed the buyer themselves but since I'd picked it up from the PO while waiting for the ruling they couldn't let me keep both the proceeds of the sale and the item.

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