The quick fix for this issue is to enter  "XX" as the state ID in SmartCheck screen. "XX" stands for "More Than One State" in this screen. 

They are actually asking for a state abbreviation (FL, CA, NY, etc.). When you get this message, either a 1099-DIV or 1099-INT is reporting tax-exempt interest/dividends and the program wants to know what state you got them from. (This information is needed for state returns only).

In most cases, they are paid from "More than one state". 

If entering "XX" as the state ID in SmartCheck screen does not work, update this post with a Comment and I will provide additional options for fixing the problem.

For on-line versions of TurboTax, "More than one state" is now showing as the option (see attached).

For desktop versions of TurboTax (cd/download), you can still enter XX (see attached). Note that the program shows XX and FL in "Blue", UK is shown in "Red" (invalid).

This still isn't working for me.  I'm on desktop, Premier edition.  State ID seems to be set to MX. But I cannot change it to XX.  I've already in smart check entered the individual (4 states including one twice as I moved so part year and part resident and part not resident). This may be where the software blocks me.  In any case the field does not seem to be editable.  I select it, icon comes up, but the field does not change.

You should delete Schedule B nd start again if you are unable to fix the state.  Here's how:

How do I view and delete forms in TurboTax Online?

• Open or continue your return in TurboTax.
• In the left menu, select Tax Tools and then Tools.
• In the pop-up window Tool Center, choose Delete a form.
• Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

@Mike Science