iPhone Simulator - does it test connecting to iTunes store?

I've just added some functionality to my game to restore purchases.  I just tested via the simulator and when i press the button I get the initial 'sign in dialog' where you can either 'use existing apple ID' or 'create new Apple ID'.

However when I click 'use existing apple ID' I get another dialog box saying 'cannot connect to iTunes store'.

Is this just because I'm running through the simulator and not on a device?

Thanks

Purchases can only be tested on a device.