: Is it okay to never explicitly state where your story takes place? Suppose my story takes place in a town called Williams. It's never stated, though, whether Williams is a town in the USA,

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Yes, it's fine. The audience only needs as much information as is significant to the story, and no more. Anymore is a distraction.

In your case, the audience probably needs to know enough to build this character for when they go on their fantasy journey. A character from 1920s New York will act and react much different than one from a small Midwestern town in 2017. In this case, the setting is building the character.

OTOH, if you were doing a careful historical period piece, then you'd want to define your locations clearly and accurately. That's a significant part of the story.

When I read your question, I immediately thought about Miyazaki. Some of his most famous and beautiful films are in an unspecified place and time. Think of My Neighbor Totoro: I don't believe the name of the city they move from, nor the town they move to is ever said. It's enough to know they went from a city to the country. The time period is not even clear. This lack of specificity allows Miyazaki great freedom in crafting an idealized, yet believable, country life.

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Is it important?

The Simpsons takes place in "Springfield" (of which there are
apparently many in the US) and they purposely don't say which one it
is, if it is any real one.
The story of "Narnia" could take place almost anywhere (the 'real
world part') and still work.

If the name of the town is important to you, use it. However, many stories take place in seemingly real places that doesn't need to be explained or proven "real" or "fictional".

Does the audience care?

I believe your audience wouldn't ask questions about the existence the town called "Williams" unless you give them a reason.

These are just two (very different) examples, but my point is that locations in stories only matter as much as you make them matter.

We (the audience) need to understand the place(s) the story takes place in. Some stories use famous landmarks etc. to play with our relation to said place(s), but in general it simply works as a location for the story to realistically take place in.

Counter-question: Do you have to mention that "it's a fictional place"?

I personally would not mention that it is a fictional place, and rather focus on making the town "Williams" come alive, fictional or not.

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