To add to the answer, if you enter tax exempt interest in Box 8 of 1099-INT during easy-step process, you then hit continue. it confirms the payors EIN. then hit continue again.
A menu will appear about uncommon situations. check the box our state doesn't tax all of this interest. You can then enter what state the muni interest came from. If you enter your state, this should flow thru to state tax return and being excluded interest on Sch. B of the state return.
