We discovered this problem before and so far looks like this is an issue with PayPal. In order to regenerate the issue, you need to set BusinessEmailOrMerchantID with your 'MerchantID' and use Encrypted Website Payments Option, then, you will get this error message that "The merchant does not have business or premier account". In order to get around this problem, simply use your Business Email address instead of the Merchant ID. The solution is really that simple and once you do that, you wont find any problem at all.

 

Now, you may wonder why should you expose your Business Email Address when you dont want to!! Ok, The reason behind using the Merchant ID is to hide your email address from the Website Visitor and your customer. Now, notice, when you are using Encrypted Website Payments Option, all payment data including your email address is encrypted by the control and then sent to the browser. So, no one can find out your Business Email Address ever when you are using Encrypted Website Payments option.