I recently had this problem with PayPal Sandbox, which Mike Jolly fixed via this thread:
My issue now is my Simple Product - "Virtual" and "Downloadable" are now going to on-hold instead of complete when a customer pays and have received payment!
I am trying to sell digital products. I have purchased with a separate credit card to test, but the customer is not receiving the product to download via email.
After payment, if I go to orders, it says on-hold (the yellow icon), and I have to manually go complete, yet I've already received the monies.