If you sell an item with free shipping, presumably you have built the shipping cost into the price of the item...so if you want $15 for it and it'll cost you $5 to ship, you list it for $20. If returned, you refund the $20, and list again for $20, so you're not really out shipping costs on the return, if you still want to get $15 for it and relist it for $20. That assumes you resell it for $20, of course. At least, that's how I figure it when offering free shipping, knowing there might be a return. I've only once deducted my shipping costs when refunding a return, on an item that cost me $22 to ship, and told the buyer I was doing so. No complaints from them, knock wood.