Having a website does not make you a business, you will need to register it with your local chamber of commerce or incorporate a company. Calling it a business does not make it a business. Officially speaking, you cannot apply for a Paypal Business account if you do not have a registered business. You can only register for a premier or paypal account.
Yes, you can sell with a Premier Account since it is similiar to a Business Account apart from the fact that the premier account is for private individuals and a business accounts for registered or incorporated business. As for taxes, you need to check with your local chamber of commerce or IRS about it.
Log into your Paypal account and click 'Contact Us' at the bottom of the page and tell them you want to downgrade to a Premier account. Alternatively, you call Paypal over the phone, it would be faster to it.