I hope this helps, this is the solution of there website. If this isnt your problem please respond and i will assist you further.
The Label stock must be fed between the upper and lower guides plates.
The path that the label must follow is shown on a sticker inside the
media cover. If the media cover is missing download the manual
by clicking on the link below. Verify that the green label guides are
adjusted so that the labels stay against the inside wall of the printer.
Depress and hold the Shift Key then press and release the Feed key. The
printer should feed some labels during which it performs an auto
calibration of the sensor. If the error continues perform the following.
Both the upper and lower sensor halves are mounted on an adjustable bar
assembly. The upper and lower guide plates slide over this assembly and
can easily be removed for routine cleaning and inspection. Should the
sensor window in either half of the guide plates be scrached or damaged,
it must be replaced.
The sensor is adjusted by a slot head screw located under the metal
lever opened to gain access for loading labels between the guide plates.
Once opened the adjusment screw is exposed.
Once you have verified the the following and the problem persists then
the sensor is itself is possibly the problem and Service should be
1. stock is loaded correctly.
2. Sensor assembly is adjusted out over the label.
3. Sensor and guide plates are clean and clear of debris or defects.
4. Configuration settings are correct (label length and media type, gap,mark or continuous).
This is the link to the 501 XP users manual