Wow, two years later, and I'm just now responding!

Okay. It looks like usaEpay requires the state to be in the two letter format. Zencart tries to send it as a state name. i.e. "Arizona" instead of "AZ". This is a problem!

If you open up usaepay_api.php and replace the billing and shipping address code around line 228 with this, it will validate the address properly.

PHP Code:
   // Billing Information
        
$tran->billfname=($order->billing['firstname']);
        
$tran->billlname=($order->billing['lastname']);
        
$tran->billcompany=($order->billing['company']);
        
$tran->billstreet=($order->billing['street_address']);
        
$tran->billstreet2=($order->billing['suburb']);
        
$tran->billcity=($order->billing['city']);
        
//change billing state abbreviation
        
$state_abbr $db->Execute("select zone_code
                                  from " 
TABLE_ZONES "
                                  where zone_name = '" 
$order->billing['state'] . "'");
                                  
$order->billing['state'] = $state_abbr->fields['zone_code'];
        
$tran->billstate=($order->billing['state']);
        
//echo ' '.$tran->billstate;
        
$tran->billzip=($order->billing['postcode']);
        
$tran->billcountry=($order->billing['country']['title']);
        
$tran->billphone=($order->customer['telephone']);
        
$tran->email=($order->customer['email_address']);

        
// Shipping Information
        
$tran->shipfname=($order->delivery['firstname']);
        
$tran->shiplname=($order->delivery['lastname']);
        
$tran->shipcompany=($order->delivery['company']);
        
$tran->shipstreet=($order->delivery['street_address']);
        
$tran->shipstreet2=($order->delivery['suburb']);
        
$tran->shipcity=($order->delivery['city']);
        
// change delivery state abbreviation
          
$state_abbr $db->Execute("select zone_code
                          from " 
TABLE_ZONES "
                          where zone_name = '" 
$order->delivery['state'] . "'");
                         
$order->delivery['state'] = $state_abbr->fields['zone_code'];
        
$tran->shipstate=($order->delivery['state']);
        
$tran->shipzip=($order->delivery['postcode']);
        
$tran->shipcountry=($order->delivery['country']['title']);
        
$tran->shipphone=($order->customer['telephone']);

        
$usaepay_error = (!($tran->Process()));

        
$result $tran->result;
        
$resultcode $tran->resultcode;
        
$authcode $tran->authcode;
        
$refnum $tran->refnum;
        
$batch $tran->batch;
        
$avs_result $tran->avs_result;
        
$cvv2_result $tran->cvv2_result;
        
$error $tran->error;
        
$errorcode $tran->errorcode;
        
$curlerror $tran->curlerror;
        
$acsurl $tran->acsurl;
        
$pareq $tran->pareq;
        
$response_msg_to_customer  $reason $tran->error
I hope that helps you! I've gotten past this part and am receiving another error entirely! I'll update the zencart module if I fix it (w00t for open source!)