I have only seen discussions on here about chargebacks.

There is a general opinion that paypal is the only one who can check if the transaction is authorised....the seller cannot do anything but rely on paypal to tell you when to post.

If it were me I would contact paypal and ask if you are covered since you relied on them to tell you that it was safe to post.

Paypal have a disclaimer that chargebacks are still possible in the future.

The OP is relying on Paypal seller protection, which hasn't been triggered due to no tracking.

The best thing is to refund, block the buyer and move on. Disputing the chargeback will result in a further charge. $15, I believe.

>The best thing is to refund, block the buyer and move on. Disputing the chargeback will result in a further charge. $15, I believe.

The chargeback fee happens regardless of whether I refund and close the case (because I'm not covered by Seller Protection) because the bank charges that, not Paypal.

However - an update in this case. I asked Paypal about how to avoid the fee and there is no way to avoid it (even though tracking shouldn't even matter, given the reason for the chargeback wasn't "item not received" but "unauthorized use"). But for some reason the buyer's bank did not charge me (i.e. Paypal) a fee. 

The person I talked to didn't know why, but she presumed it was because the value of the sale ($5.50) was so small.