More questions than answers here.
First, did you setup a tax table in your Account Profile? Normally this is how tax is applied however, you can override that in in your item button code.
Next, how did you create the item button code? If you used the online button creator, then most likely the code is stored on the PayPal Servers. If you included the tax there, then you need to edit the button. If not then you need to edit your tax table in your profile.
Find the saved button, login to your account, click on Merchant Services, under Tools and Settings, click on My Saved Buttons. Locate the item button and edit.
To edit your tax table, click on Profile, then click on My Selling Tools, under Selling Online, locate Sales Tax, click on Update. Make your changes and edit.
Last thought, if you manually created your item button code, check to see if you have used the "tax" variable, if yes, you would need to change the value.
