so I understand the exchange rate would have to be high to cover the 5% but can anyone share info regarding tax / financial obligations?
It is hard to understand your question.
If you sell a digital item for PayPal and as the seller there are tax / financial oblications, then you still would have those same obligations whether you accept wire transfer, or cash, or bitcoins.
Here's more info:
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http://en.bitcoin.it/wiki/Tax_compliance* People might be interested in purchasing digital product with their BTC but people with the digital product might not be interested in cashing out to BTC or vice versa
If you want to sell something in exchange for bitcoins but not hold bitcoins then you can use a payment processor so that there is no (zero, nada, 0.0) exchange rate risk to you. Meaning you sell an item for $10, you get $10 sent to you (less payment processor fee, of about 1%). (Of course, there could be bank transfer fees for the payouts as well, but those are trivial in the U.S. and many other places.)