Q: how dose family sharing work when one person wants to use a gift card?

kokogo,

Purchases made in the iTunes and App Stores will first attempt to use any store credit that exists on the purchaser's account. Barring sufficient credit, the family organizer's card will be used for the purchase.

First, their store credit will be used to pay the partial or total bill. The remainder will bill to the family organizer's card. As the family organizer, any receipts generated by the transaction will be sent to you. Learn more about how iTunes Store purchases are billed.

Family purchases and payments
https://support.apple.com/en-us/HT201079

Sincerely,

Allen