Hi,
I found this when I was upgrading from 1.3.5 to 1.3.7. The same problem in both versions:
Many countries don't have states at all. I don't require my customers to fill it in when they create accounts.
Then I tried to specify all customers from one country as a discount group. It turned out that it was impossible to get the markings I made on the customer data to stay there, unless there was at least one character in the state field. I went and wrote an ' in every state field for that country's customers. After that, the markings for membership in the discount group stayed in place.
It took some time before I figured out the relationship. Two customers had made that ' marking, and that's what helped me find the relationship.
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