No. This is "returned merchandise" and not dutiable or taxable.
When you pick up the item, be prepared and have a print out of your original sale and shipping as well as the paperwork around the return.
You are only required to refund his original payment. That is Standard Practice and is based on what would happen if Paypal and eBay were involved. You do not refund until you have recieved the item and inspected it for damage.
If the reason for the return is your error, it would be a Best Practice also to refund his return shipping. Because you are the Good Guy, eh?
If the problem is on the buyer's end, for example you sold a red sweater and he is returning it because it is scarlet and he wanted cherry, a restocking charge or only refunding the selling price would be ethical. On the other hand, he will be leaving feedback and Detailed Seller Ratings, so....
