The in-app purchases works the same way as the public build. Yes, you do have to act as though you are actually buying the IAP however it goes through a "Sandbox Environment" or "non production environment" which means YOUR ACCOUNT IS NOT CHARGED. It goes through the process but doesn't access your account.
TestFlight does alert you of this that you WONT be charged when attempting to 'buy' the IAP.
Customer support service by UserEcho