When to use restoreCompletedTransactions for in-app purchases?

Update (June 2019)

Apple's documentation on this topic was updated in 2018 and is quite comprehensive. Many of its recommendations are consistent with what we ended up figuring out here. The biggest development since this question was first posted in 2009 is the App Store receipt in iOS 7.

In case the link goes stale at some point in the future, I'll quote some of the documentation here.

Restoring Purchased Products

Users restore transactions to maintain access to content they’ve already purchased. For example, when they upgrade to a new phone, they don’t lose all of the items they purchased on the old phone. Include some mechanism in your app to let the user restore their purchases, such as a Restore Purchases button. Restoring purchases prompts for the user’s App Store credentials, which interrupts the flow of your app: because of this, don’t automatically restore purchases, especially not every time your app is launched.

In most cases, all your app needs to do is refresh its receipt and deliver the products in its receipt. The refreshed receipt contains a record of the user’s purchases in this app, on this device or any other device. However, some apps need to take an alternate approach for one of the following reasons:

• If you use Apple-hosted content, restoring completed transactions gives your app the transaction objects it uses to download the content.
• If you need to support versions of iOS earlier than iOS 7, where the app receipt isn’t available, restore completed transactions instead.
• If your app uses non-renewing subscriptions, your app is responsible for the restoration process.

Refreshing the receipt asks the App Store for the latest copy of the receipt. Refreshing a receipt does not create any new transactions. Although you should avoid refreshing multiple times in a row, this action would have same result as refreshing it just once.

Restoring completed transactions creates a new transaction for every completed transaction the user made, essentially replaying history for your transaction queue observer. While transactions are being restored, your app maintains its own state to keep track of why it’s restoring completed transactions and how it needs to handle them. Restoring multiple times creates multiple restored transactions for each completed transaction.

Previous Answer (2009-2012)

After writing out the question and thinking about it, I came up with a couple solutions.

Automatic (Not Recommended)

One option is to record in user defaults whether restoreCompletedTransactions has been called (and successfully completed) yet in the app. If not, the app calls it once on start-up. Since this flag could be stored in the same place as the nonconsumable payments, if user defaults get wiped later on then the restore method would get called again when the app starts.

This way, if an existing costumer is somehow doing a fresh install of the app they still get their purchases restored automatically. If they are a new customer that has never launched the app before, then the restore operation returns nothing.

In either case, restoreCompletedTransactions is only called once instead of at every launch.

Manual (Recommended)

Another option is to offer the customer a "Restore Purchases" button somewhere, hook it up to restoreCompletedTransactions and let them decide if and when it might be needed.

(The comments below go into why a manual restore is probably better than attempting to do it automatically.)

Don't forget that one Apple ID can span multiple devices. So maintaining a flag on one one device (say, the user's iPhone) that tells you whether or not you've done a restore will not allow you to detect if the customer has made a purchase on another device (say his iPad) that needs to be restored onto the iPhone. So having a manual method of launching a restore is ALSO necessary, even if you have an automatic method.

To make matters worse, I haven't figured out yet how you're notified when REFUNDS of IAPs are made. I suspect the restore process will simply return a list of the non-refunded transactions. So a) you need to DELETE your record of the user's IAP's when you do your restore in case refunded products are simply not reported during restore, and b) you need to periodically do a restore automatically in order to pick up refunds.

This all highlights the problem with Apple's IAP -- it's poorly conceived and inadequately documented -- and now it's REQUIRED for content providers like ebook readers who already have perfectly functioning web-based stores already working in their apps (like Kindle).

Whenever you have a non-consumable in-app purchase, for a example a new Race Track, you need to implement a 'Restore' button somewhere in the app so the user can restore their purchase if they change devices or delete the app. This is mandatory and I've had Apple reject an app before for not implementing the Restore button.