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I have a problem and this has happened more than once. Some buyers file a dispute for my digital items/services and then when I want to fight/respond to the case, it asks "Choose your return shipping address". What do I do in a case like this? It wont let me proceed without selecting my address!(see image below) My address is irrelevant because the item was not shippable. It was a service. This has happened more than once. Is there some sort of setting in my PayPal account that needs to be changed so that the transactions are set to "non-shippable digital services"? This is quite frustrating.
That's the buyer's problem. Just select a return shipping address. If they can't ship it back, then they'll lose the case or PayPal will rule against them. But you can write in the "Provide more information' field that the item is digital goods and select the return shipping address to send a response. Up to you.
Now if you're using standard PayPal Buy Now/Pay Now buttons, there is a setting in the button or API to not require shipping addresses.
See #4: "Under Do you need your customer's shipping addresses?, click one of these options:" under "Customize the checkout page" section
For more info about disabling shipping address go to: https://developer.paypal.com/home/
and type in "no shipping address required" in the search bar at the top for relevant topics.