It's more about expectation management than whether it's possible to do it. They absolutely will take your return or exchange in the store if they can it's just a lot less easy for them and it's potentially disappointing for Customers to believe they can get things exchanged (maybe stock is not there) or process a refund (which can only be back to the original payment method, which might very well be PayPal or one of the other payment methods).
It's more about expectation management than whether it's possible to do it. They absolutely will take your return or exchange in the store if they can it's just a lot less easy for them and it's potentially disappointing for Customers to believe they can get things exchanged (maybe stock is not there) or process a refund (which can only be back to the original payment method, which might very well be PayPal or one of the other payment methods).
It's not so black and white.