@kevinntax
TurboTax asks that because even though they are exempt Federally, some states will tax exempt interest/dividends from another state. But Washington has no state income tax, so it's moot.
The popup help for that screen says "You can select More than one state and continue if you live in a state with no income tax (such as AK, FL, NV, SD, TX, WA, WY)."
EDITED:
See my next comment with 2 screen images that show you 2 ways to get to the choice "multiple states", which will let you continue.
