After discussing this with a Google representative I found that there is a round-about way of offering the app for free to testers. The tester must initially pay for the app. However, it turns out that refunds initiated by the developer actually behave differently than those initiated by Google.
Google refund: License is revoked and the user will no longer have access to the app.
Developer refund: License is NOT revoked, the app will remain fully functional IF you are only testing for license response. If you verify Order IDs it will fail since the order status will have changed (this would be a custom implementation). For developers who implemented the recommended license verification example this would effectively yield a free app.
Caveat: I haven't tested this yet as my app is a couple months from release, but here's my chat:
me
Ok can you please explain the refund then. As I understood it a refund would deauthorize the user's license, so I assumed you meant refund outside of the Google payment system.
Artemis
If you yourself initiate the refund, the user will not lose access to the app in their library.
Unless you have designed your app to constantly check the order ID's status to trigger the revoke action or the like.
If a user initiate's a refund through Google, yes, they will no longer have the app in their library and they will lose access to the content.
me
OK, since I only check the license response from the server any refund I initiate will yield a fully functional and free app in the user's library?
Artemis
Well, I am unable to validate your app's code or what you have done in its design.
I am only able to confirm that if you refund a user's purchase for an app, that Google will not revoke the app from their library or their access to the app's content.
me
Excellent, perhaps I missed the documentation on this somewhere, but I searched quite thoroughly and most information states that the developer can NOT offer the app for free to testers.
This would be great information to add to the developer console help and the testing pages.
Artemis
That is true, you cannot offer the app as free to testers.
The app must be paid for, no matter what.
However, as with all apps, alpha, beta, or production, you are welcome to refund your users however you would like.