FlatBitcoin does not sell a digital Currency.(not directly) We do sell a digital service, by delivering a certain amount of BTC from our Wallet to our Customers Wallet. This means, we are not a trading company, we do not "sell a digital currency", we sell a digital delivery service. Digital Downloads/services are not against PayPal's TOS.
Thus Our service does not infringe PayPal's TOS.
You can dress it up all you like, but before the transaction you have the BTC and they have the PPUSD, and after the transaction you have the PPUSD and they have the BTC, so therefore you used Paypal to sell the BTC.