As a seller myself - I would only refund her the cost of the item, but do not give her any of the shipping charges incurred. I have never charged someone a re-stocking fee because you can get your fees paid back. You can file a dispute with Ebay under Dispute Resolution. Since the bag was returned you, you can state that you refunded their money and will be able to receive your final Ebay Fees back. Ebay also will let you relist the item and if it sells the second time, you will not be charged that listing fee. If they paid by paypal, you will receive your fees back upon completing refund. Lastly, do not refund any money until you receive the bag back and can confirm it's condition. Good Luck.