I sold a luger and holster to a buyer in PA. Buyer asked if I would acc. 600$ of the 1665$ total and send the holster and then buyer would send balance, I agreed. Buyer received photos of holster and gun, and when the holster was received buyer said that it was not in condition that they wanted, and would not send balance, or take luger and send back holster. buyer has had gun on hold for 2months. I have refused to refund money and buyer said they would wait till I sold the holster and gun to refund part of the deposit, then quit responding to emails, Question, Am I doing anything illegal by keeping the deposit? or is this a civil matter at best?

It would be a civil matter if anything, but you may want to speak with an attorney to discuss your legal options. Some do offer free consultations. You can locate one through the attorney locator on Lawinfo's home page at http://www.lawinfo.com/.