There's a common misconception that PCI DSS only covers entities who "store, process, or transmit cardholder data. You need to realize:
- Even though it's encrypted, it's still cardholder data and still subject to PCI DSS. (see PCI DSS FAQ 1086)
- Any entity that can impact the flow of said cardholder data is in scope for PCI DSS, which means you.(see the same FAQ)
There are some exceptions to each of these if you read the last couple paragraphs of the FAQ.
That said, the first question you need to answer that greatly impacts your level of required compliance as well as who you should report it to is who is the merchant of record on the transactions? Will PayPal be collecting the payments and giving you a daily/weekly/monthly settlement deposit minus fees or does each payment go directly to your merchant account and you pay your PayPal fees separately.
If you are the merchant of record, you would be subject to compliance as a merchant, if PayPal is the merchant of record you would actually become their service provider.
When you are the merchant, your bank will dictate what proof of compliance you provide them depending on what merchant level you are (http://pcipolicyportal.com/what-is-pci/merchants/). You will most likely be able to self-assess. If you are using PayPal's embedded payment form then you would most likely qualify for an SAQ A, possibly an SAQ A-EP. If you use the API then you'll most likely be required to complete an SAQ D. All downloadable from the PCI SCC website.
When you are a service provider, you are at the mercy of the merchant of record, in this case PayPal. They can dictate any kind of compliance they deem appropriate as they are liable for the security of every transaction. From a PCI perspective you would either complete an SAQ D Service Provider or Report on Compliance(ROC) and Attestation of Compliance(AOC), each downloadable from the PCI SCC website.
TLDR: Just use PayPal Pro's embedded forms, complete an SAQ A and be done with it. If PayPal is the merchant of record for the transactions it's up to them to tell you what compliance steps you need to complete. If you use the API, have fun completing the SAQ D.