We are having a similar problem, although it is not a location issue. We are in New York State and a customer placed an order from Canada.
The order went through even though the payment method is Gift Certificate/Coupon, and we have not configured any coupons etc yet. We can not duplicate this error; every time one of us tries the coupon is rejected.
We are running 1.3.8 with Super Orders and Edit Orders.
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