In the federal 1099 interview, I did enter the amount from the 1099. Then when asked if it was from more than one state, I checked the box the it was from more than one state. Then I entered the Arizona amount and the remainder as from more than one state.
The Arizona step by step numbers were not correct, so I added lines to the explanation statement to force a match from my 1099s to the non Arizona municipal interest income (which includes both interest and dividends).
While I don't like the work around, my Arizona interest is not taxed by Arizona - Good.
