Sales tax is not applied to shipping when using Paypal express checkout. The "Taxed line items: shipping" checkbox is properly checked under admin/stores/settings/taxes.
The sales tax is properly applied to shipping when using Paypal website payments standard.
Also, when using paypal express checkout, the first time through the process, no tax will be applied to the shipping cost as explained above. However, if one goes back from the "submit order" page to the "review payments" page, then hit "continue checkout" again, sales tax WILL properly be applied to the PREVIOUS shipping method selected (i.e. not the current shipping method, unless they are one in the same).
Thus, it appears that Ubercart is not loading the current shipping cost to properly calculate tax on; it only calculates tax on previously selected shipping costs, which for most users will be $0 as they won't hit back and re-select a shipping method.
This violates sales tax laws for the state of Texas and possibly other states, which is why I marked in critical.