Is that how it's been arranged and agreed, that he sends you a return shipping label and refund?
Usually you would not receive a refund until the item is returned.
I'm not sure about the US, but in Australia we are required to post items back by a trackable method, and the seller is not obliged to pay for or to refund the cost of return postage. It's often said that good sellers will.
Have you tried phoning the company?
Keep an eye on the date when you made the purchase. You've got 45 days from the date of purchase to open a PayPal dispute, and if necessary, to raise that dispute to a claim.
But if the seller's a registered business and has been fair with you so far, I wouldn't imagine you'd need to go through that PayPal dispute route.