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Accurate models describing the relationship between genotype and phenotype are necessary in order to understand and predict how mutations to biological sequences affect the fitness and evolution of living organisms. The apparent abundance of epistasis (genetic interactions), both between and within genes, complicates this task and how to build mechanistic models that incorporate epistatic coefficients (genetic interaction terms) is an open question. The Walsh-Hadamard transform represents a rigorous computational framework for calculating and modeling epistatic interactions at the level of individual genotypic values (known as genetical, biological or physiological epistasis), and can therefore be used to address fundamental questions related to sequence-to-function encodings. However, one of its main limitations is that it can only accommodate two alleles (amino acid or nucleotide states) per sequence position. In this paper we provide an extension of the Walsh-Hadamard transform that allows the calculation and modeling of background-averaged epistasis (also known as ensemble epistasis) in genetic landscapes with an arbitrary number of states per position (20 for amino acids, 4 for nucleotides, etc.). We also provide a recursive formula for the inverse matrix and then derive formulae to directly extract any element of either matrix without having to rely on the computationally intensive task of constructing or inverting large matrices. Finally, we demonstrate the utility of our theory by using it to model epistasis within both simulated and empirical multiallelic fitness landscapes, revealing that both pairwise and higher-order genetic interactions are enriched between physically interacting positions. Author summary: An important question in genetics is how the effects of mutations combine to alter phenotypes. Genetic interactions (epistasis) describe non-additive effects of pairs of mutations, but can also involve higher-order (three- and four-way etc.) combinations. Quantifying higher-order interactions is experimentally very challenging requiring a large number of measurements. Techniques based on deep mutational scanning (DMS) represent valuable sources of data to study epistasis. However, the best way to extract the relevant pairwise and higher-order epistatic coefficients (genetic interaction terms) from this data for the task of phenotypic prediction remains an unresolved problem. The Walsh-Hadamard transform represents a rigorous computational framework for calculating and modeling epistatic interactions at the level of individual genotypic values. Critically, this formalism currently only allows for two alleles (amino acid or nucleotide states) per sequence position, hampering applications in more biologically realistic scenarios. Here we present an extension of the Walsh-Hadamard transform that overcomes this limitation and demonstrate the utility of our theory by using it to model epistasis within both simulated and empirical multiallelic genetic landscapes. [ABSTRACT FROM AUTHOR]