I cant figure out if I should categorize my Paypal transactions as sales receipts or deposit. I take payments through paypal and then transfer to my checking account.

Yes, you may categorize the transactions as either deposit or sales receipt, neuractor2-gmail.

If you'll use a sales receipt, make sure it's associated with the correct Income account, same goes with the deposit. This way, they'll be posted to your income. You may also consider consulting an accountant for some advice to make sure your books are accurate.

Also, I've added these articles for your guide on future tasks in QBO:
 

• Categorize and match online bank transactions in QuickBooks Online.
• Reconcile an account in QuickBooks Online.

Don’t hesitate to visit the Community again if you have other banking concerns. I’ll get back to help and make sure you’re taken care of.

Ok thanks