Another option is to use an otherwise unused field on the customer records for this, one that you can filter reports on.
For example, you could use the Customer Type field or the Job Type fields, and set them up to contain the regions you want to report on, like "West" for the list of states you mention. (Or, you could set up all 50 states and use states.) Then filter the report on that field. Both of the fields mentioned allow for multiple matches if needed.
This may work better than the Custom fields, as transaction report filters on custom fields need the data to be entered on transactions in order to work (the value on the customer isn't used) while the fields mentioned above use the value saved on the customer.
