Hi,
You encounter this error when you enable a country that use states but you don't download the associated localization pack.
In example, you have enabled Australia in you BO, but australian addresses have a state field. If you don't download the Australian localization pack your customers will not be able to select the state for their address, and PayPal will show you this error.
To resolve this issue, you just have to download all of the localization packs associated to all of the countries enabled in your BO.
Regards.