there's a lot of threads on this topic in the "getting taxes done" forum, if it is exempt for your state (which can be ambiguous or disallowed in some states) - the only general solution I've seen without trying to manipulate the 1099s, is to make a "miscellaneous" subtraction on state taxes with explanation, which most state programs should support or provide similar feature, tho some have reported it precludes e-file (NY I think was one example).
