From the Super Mario Wiki
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The Post Office is located east of Princess Peach's Castle in Toad Town. Parakarry and the Postmaster work here. In Paper Mario, Mario and his party can come here to read mail that was posted during the course of the chapter. The mail received is only for Mario's party, while mail for Mario himself is delivered to his house and can be found by his bed.
The Mailbag there is stolen during Chapter 4 of Paper Mario, when the Shy Guys invade Toad Town. After it is stolen, Mario will be unable to read the letters here. Retrieving the mailbag from Shy Guy's Toy Box and returning it here entitles Mario to a Star Piece as a reward.