Do you have a business account? I've never issued a refund from my personal account, but when I have from a business account, I find the transaction and select "refund." Say, for simplicity, it was a $10 transaction and the fee was $1. (I'm not doing the math...just using that as an example.) The refund will say something like, "Amount to be refunded - $10. $9 from your account, $1 from PayPal." That's not exactly the terminology, but they do refund the entire amount the buyer paid, and they don't keep the fee they charged. Does that make sense?
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