Your only option really is to file a dispute with Paypal, but more than likely you will lose. It's $3... Let it go. His TOS may be a bit confusing, but it clearly states that refunds wont be given to proxy and vps accounts.
Theres a lot of shady hosts out there and theres one thing most of them have in common, they fail miserably. If you want to voice your opinion about the hosts, there are many places to do that. Just make sure what you say is factual or opinion, otherwise you might open yourself up to legal issues..
I will just add that I was in a similar situation last month or so and I won the paypal dispute, I honestly didnt think I would as it was over "virtual" goods.
It was also for a small amount but it was the principle of the whole thing and as it turned out I won lol..
Hmm, did the host disputing that say it was virtual?..
Yep, the host that was disputing did say I can't file a PayPal dispute because it was virtual goods...
No they didnt say much at all hence the reason I opened a paypal dispute even though I thought I didnt have a chance..
I filed a PayPal dispute against a web hosting company and won. The hosting company went down without notifying me but kept billing me and not providing the service that I was paying for...
File an unauthorised claim, you should win the battle Although, small companies usually do such things for 3$ I really dont think a refund of 3$ could do a lot harm on his TOS, and as OP hasn't used his service for a single day, definitely he deserves a Full Refund. It doesn't matter what does TOS states, but for humanity it does..