There are multiple payment options in Google Play, from credit and debit cards to carrier billing and gift cards, but PayPal isn't one of them. Google Wallet competes with PayPal and this could be one of the reasons why you can't use PayPal in Google Play.
Despite this, some Google Wallet JavaScript files that are used in Google Play include many references to PayPal. For example, PayPal is placed next to Maestro, Automated Clearing House (ACH), proxy cards and carriers like Sprint, Softbank and Vodafone. Google's code also mentions PayPal UUIDs, which are used by the PayPal Merchant API, and there's a function named "onRedirectToPayPalPopup". There's also an error message: "PAYPAL_INSTRUMENT_ERROR" next to messages like "GIFT_CARD_ALREADY_REDEEMED" and "INVALID_CREDIT_CARD".
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