Is a google merchant account required for testing apps on g-play?

Like the title says, is a merchant account mandatory for testing the IAP logic of an app. The app has a set of fixed items a user can permanently purchase. These items must be added to the In-app section of the g-play console (I'm following the README from:

https://github.com/googlesamples/android-play-billing

Code (CSharp):

1.  
2. This sample can't be run as-is. You have to create your own
3. application instance in the Developer Console and modify this
4. sample to point to it. Here is what you must do:
5.  
6. ON THE GOOGLE PLAY DEVELOPER CONSOLE
7.  
8. 1. Create an application on the Developer Console, available at
9.   https://play.google.com/apps/publish/.
10.  
11. 2. Copy the application's public key (a base-64 string). You can find this in
12.    the "Services & APIs" section under "Licensing & In-App Billing".
13.  
14. IN THE CODE
15.  
16. 3. Open MainActivity.java, find the declaration of base64EncodedPublicKey and
17.    replace the placeholder value with the public key you retrieved in Step 2.
18.  
19. 4. Change the sample's package name to your package name. To do that, update the
20.   package name in AndroidManifest.xml and correct the references (especially the
21.   references to the R object).
22.  
23. 5. Export an APK, signing it with your PRODUCTION (not debug) developer certificate.
24.  
25. BACK TO THE GOOGLE PLAY DEVELOPER CONSOLE
26.  
27. 6. Upload your APK to Google Play for Alpha Testing.
28.  
29. 7. Make sure to add your test account (the one you will use to test purchases)
30.   to the "testers" section of your app. Your test account CANNOT BE THE SAME AS
31.   THE PUBLISHER ACCOUNT. If it is, your purchases won't go through.
32.  
33. 8. Under In-app Products, create MANAGED in-app items with these IDs:
34.        premium, gas
35.    Set their prices to 1 dollar. You can choose a different price if you like.
36.  
37. 9. Under In-app Products, create SUBSCRIPTION items with these IDs:
38.        infinite_gas_monthly, infinite_gas_yearly
39.    Set their prices to 1 dollar and the billing recurrence to monthly for
40.    infinite_gas_monthly and yearly for infinite_gas_yearly. To prevent being charged
41.    while testing, set the trial period to 7 days.
42.  
43. 10. Publish your APK to the Alpha channel. Wait 2-3 hours for Google Play to process the APK
44.    If you don't wait for Google Play to process the APK, you might see errors where Google Play
45.   says that "this version of the application is not enabled for in-app billing" or something
46.   similar. Ensure that the In-App products move to the "Active" state within the console before
47.   testing.
48.  
49. TEST THE CODE
50.  
51. 11. Install the APK signed with your PRODUCTION certificate, to a
52. test device [*].
53. 12. Run the app.
54. 13. Make purchases using the test account you added in Step 7.
55.  
56.  

Upon creating a managed item, I get the following message:

Code (CSharp):

1. Your app doesn't have any in-app products yet.
2.  
3. To add in-app products, you need to set up a Google Payments merchant account.
4. Set up a merchant account

Is there any fee required (either one time payment or subscription) require for creating a merchant account? I did not find anything related in google's tos.

 

You should have a 'developer account' setup up through the 'google play console'. In your developer console you can setup test merchant accounts to use.

 

Where is the respective setting? All options for my app which is released as a closed, free, alpha, require setting up a merchant account.

There doesn't seem to be a (functionally distinct) merchant account:

https://developers.google.com/shopping-content/v2/how-tos/testing

 

This is more a google account question rather than a Unity scripting question.

If you want to test google play related billing and in-app purchasing... consult the google documentation on this. For example here:
https://developer.android.com/google/play/billing/billing_testing