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PayPal IPN - Cannot Sandbox

I am trying to code a simple PayPal purchase page with options on my site. However, I am having trouble testing it. For some odd reason, when I use " http://paypal.com/cgi-bin/webscr " as the form URL, it seems to work, however I can't test the IPN without someone purchasing it. If I leave it as " http://sandbox.paypal.com/cgi-bin/webscr ", it will pop up with this on the PayPal Sandbox site,

PayPal cannot process this transaction because of a problem with the seller's website. Please contact the seller directly to resolve this problem.

Below is my Form:

<form action="https://www.sandbox.paypal.com/cgi-bin/webscr" method="post" target="_top">
    <input type="hidden" name="cmd" value="_s-xclick">
    <input type="hidden" name="hosted_button_id" value="YDPZBQ2LRBCSE">
    <table>
    <tr><td><input type="hidden" name="on0" value="Packages">Packages</td></tr><tr><td><select name="os0">
    <option value="Bronze">Bronze $10.00 USD</option>
    <option value="Silver">Silver $25.00 USD</option>
    <option value="Gold">Gold $50.00 USD</option>
    </select> </td></tr>
    <tr><td><input type="hidden" name="on1" value="Wubbo Username">Wubbo Username</td></tr><tr><td><input type="text" name="os1" maxlength="200"></td></tr>
    </table>
    <input type="hidden" name="currency_code" value="USD">
    <input type="image" src="http://wubbo.me/paypal/buynow.png" border="0" name="submit" alt="PayPal - The safer, easier way to pay online!">
    <img alt="" border="0" src="https://www.paypalobjects.com/en_US/i/scr/pixel.gif" width="1" height="1">
</form>

And here is my IPN Code:

<?php
mysql_connect("localhost", "root", "PASSWORD") or die(mysql_error());
mysql_select_db("DATABASE") or die(mysql_error());

// STEP 1: read POST data
// Reading POSTed data directly from $_POST causes serialization issues with array data in the POST.
// Instead, read raw POST data from the input stream. 
$raw_post_data = file_get_contents('php://input');
$raw_post_array = explode('&', $raw_post_data);
$myPost = array();
foreach ($raw_post_array as $keyval) {
    $keyval = explode ('=', $keyval);
if (count($keyval) == 2)
 $myPost[$keyval[0]] = urldecode($keyval[1]);
}
// read the IPN message sent from PayPal and prepend 'cmd=_notify-validate'
$req = 'cmd=_notify-validate';
if(function_exists('get_magic_quotes_gpc')) {
    $get_magic_quotes_exists = true;
} 
foreach ($myPost as $key => $value) {        
    if($get_magic_quotes_exists == true && get_magic_quotes_gpc() == 1) { 
        $value = urlencode(stripslashes($value)); 
    } else {
        $value = urlencode($value);
    }
    $req .= "&$key=$value";
}

// Step 2: POST IPN data back to PayPal to validate
$ch = curl_init('https://www.sandbox.paypal.com/cgi-bin/webscr');
curl_setopt($ch, CURLOPT_HTTP_VERSION, CURL_HTTP_VERSION_1_1);
curl_setopt($ch, CURLOPT_POST, 1);
curl_setopt($ch, CURLOPT_RETURNTRANSFER,1);
curl_setopt($ch, CURLOPT_POSTFIELDS, $req);
curl_setopt($ch, CURLOPT_SSL_VERIFYPEER, 1);
curl_setopt($ch, CURLOPT_SSL_VERIFYHOST, 2);
curl_setopt($ch, CURLOPT_FORBID_REUSE, 1);
    curl_setopt($ch, CURLOPT_HTTPHEADER, array('Connection: Close'));
// In wamp-like environments that do not come bundled with root authority certificates,
// please download 'cacert.pem' from "http://curl.haxx.se/docs/caextract.html" and set 
// the directory path of the certificate as shown below:
// curl_setopt($ch, CURLOPT_CAINFO, dirname(__FILE__) . '/cacert.pem');
if( !($res = curl_exec($ch)) ) {
    // error_log("Got " . curl_error($ch) . " when processing IPN data");
curl_close($ch);
exit;
}
curl_close($ch);

// inspect IPN validation result and act accordingly
if (strcmp ($res, "VERIFIED") == 0) {
    // The IPN is verified, process it:
    // check whether the payment_status is Completed
    // check that txn_id has not been previously processed
    // check that receiver_email is your Primary PayPal email
    // check that payment_amount/payment_currency are correct
    // process the notification
    // assign posted variables to local variables
    $package = $_POST['os0'];
    $username = $_POST['os1'];

    if ($package == 'Bronze') {
        mysql_query("UPDATE `users` SET `vip_points` = (`vip_points` + 10) WHERE username = '" . $username . "'");
    } else if ($package == 'Silver') {
        mysql_query("UPDATE `users` SET `vip_points` = (`vip_points` + 30) WHERE username = '" . $username . "'");
    } else if ($package == 'Gold') {
        mysql_query("UPDATE `users` SET `vip_points` = (`vip_points` + 100) WHERE username = '" . $username . "'");
    }
}


} else if (strcmp ($res, "INVALID") == 0) {
// IPN invalid, log for manual investigation
echo "The response from IPN was: <b>" .$res ."</b>";
}
?>

Any assistance would be greatly appreciated!

You should create a sandbox account and create a sandbox button to test. To create a sandbox account, you should access developer.paypal.com, login with your live PayPal account, then follow up the link below to create a sandbox account(from step 2): https://ppmts.custhelp.com/app/answers/detail/a_id/744/kw/sandbox

After created sandbox account, you can access www.sandbox.paypal.com and login with the sandbox account, then follow up the link below to create a button for sandbox environment: https://ppmts.custhelp.com/app/answers/detail/a_id/740/kw/create%20button

You're getting that error message because you modified a hosted button. If you create the button on PayPal then change the button code after you have copied it you get that error. You need to either make all modifications on PayPal or use an open source button.

Here is an example of an open source button you will need to add your own email or merchant id from your PayPal Account for it to work:

<form target="paypal" action="https://www.paypal.com/cgi-bin/webscr" method="post" >
<input type="hidden" name="cmd" value="_cart">
<input type="hidden" name="business" value="youremail@email.com">
<input type="hidden" name="lc" value="US">
<input type="hidden" name="item_name" value="Sample Cart">
<input type="hidden" name="button_subtype" value="products">
<input type="hidden" name="no_note" value="0">
<input type="hidden" name="cn" value="Add special instructions to the seller:">
<input type="hidden" name="no_shipping" value="2">
<input type="hidden" name="currency_code" value="USD">
<input type="hidden" name="add" value="1">
<input type="hidden" name="bn" value="PP-ShopCartBF:btn_cart_LG.gif:NonHosted">
<table>
<tr><td><input type="hidden" name="on0" value="Registration">Registration</td></tr><tr><td><select name="os0">
<option value="Bronze">Bronze $10.00 USD</option>
<option value="Silver">Silver $25.00 USD</option>
<option value="Gold">Gold $50.00 USD</option>
</select> </td></tr>
<input type="hidden" name="currency_code" value="USD">
<input type="hidden" name="option_select0" value="Bronze">
<input type="hidden" name="option_amount0" value="10.00">
<input type="hidden" name="option_select1" value="Silver">
<input type="hidden" name="option_amount1" value="25.00">
<input type="hidden" name="option_select2" value="Gold">
<input type="hidden" name="option_amount2" value="50.00">
<input type="hidden" name="option_index" value="0">
</select> </td></tr>
<tr><td><input type="hidden" name="on1" value="Wubbo Username">Wubbo Username</td></tr><tr><td><input type="text" name="os1" maxlength="200">     </td></tr>
</table>

<input type="image" src="https://www.paypalobjects.com/en_US/i/btn/btn_cart_LG.gif" border="0" name="submit" alt="PayPal - The safer, easier way to pay online!">
<img alt="" border="0" src="https://www.paypalobjects.com/en_US/i/scr/pixel.gif" width="1" height="1">
</form>

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