1. Login to Paypal
2. Click on Profile (top right)
3. Under Selling Preferences, click 'Sales Tax'
4. Click Add New Sales Tax' under 'Domestic tax rates'
5. Choose your state
6. Set the Tax Rate for your county
7. Click 'Continue' at the bottom
 

Then you have to setup the Shipping Calculations because that's required to make the sales tax work correctly.

How to setup Shipping in your PayPal account:
1. Login to your PayPal account.
2. Click on Profile.
3. Under the Selling Preferences column, click on 'Shipping Calculations' (this may be under 'My Selling Tools' if you're looking at the newer version of PayPal's website.
4. Under Domestic Shipping Methods, click 'Add New Shipping Method'.
5. Click the Start Button for Domestic Shipping Methods
6. Choose the states you want to ship to and click add. (You will use the control key to click multiple states, or click the first one and then scroll down and hold shift then select the last one and it will select all of them)
7. Click Continue
8. Choose Free Shipping in the first dropdown (depending on whether or not you're setting that in the buttons in CuBit or not, or if you're just including it in the price and calling it Free Shipping)
9. Choose 3-5 Business days (this doesn't matter if you're setting a special shipping price in your PayPal button)
10. Then choose 'Total item quantity'
11. Leave the default values and input '0' in the Rate field.
12. Click Continue
13. Click Save Shipping Methods

Test the settings by attempting to make a purchase in your cart. to make sure it works correctly, then You're Done!

Any Questions, please call PayPal Directly: 888-221-1164