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Just FYI, it appears the sandbox endpoint and live endpoint of Paypal's IPN verification system have different encoding needs. This has been discussed at some length here: https://github.com/mike182uk/paypal-ipn-listener/issues/30
If you're using PHP, the solution is to use rawurlencode/decode with sandbox, and urlencode/decode with live. I'll get back to you with a new solution once PP changes things without announcements again and breaks everyone's **bleep**, as usual.
Frustrating PayPal policy about this issue could be summarized into "don't know, don't care". IPN simulator is useless for me too.
18 of March 2018 and still not any official answer from Paypal?
This is really sick.
Having the same issue, what am I supposed to do?
I'm using WordPress and my listener for the PayPal simulator goes to a standard WordPress page and I get the same error message in the sandbox.
After changing the URL of my listener to a file directly on my root Web-space I solved the problem :-)
Now I can use the PayPal simulator in the sandbox :-)