@DetroitRick agree, this 3rd party argument is referred to on Internet threads on this topic like the link above, and there are arguments the other way also. What matters is what's actually written in the state tax code and interpretation of it in specific states which can vary in their language, or settled in the courts (e.g. NC ruled it is not exempt from state tax).
TT just doesn't handle this situation, but I don't interpret that as a clear legal position they've taken after analyzing all the state tax codes.
If in doubt as you have done it's best to consult a CPA who is expert in the state tax code and is accountable for a decision whether to exclude or include it.
