I've often read that entanglement entropy in quantum field theory is ill-defined because local algebras are generally of type III, which implies that a trace doesn't exist. For a normal state $\omega_{\rho}$ in the folium of an arbitrary state $\omega$, we can consider the GNS triple $(H, \pi, \Omega)$ for $\omega$ and a density matrix $\rho \in B(H)$. The state is given by
$$ \omega_{\rho}(A) = \langle \Omega,\rho \pi(A)\Omega \rangle $$
for all $A \in \mathcal{A}$. Suppose we have a type III von Neumann algebra. The entropy would then be
$$ S(\omega_{\rho}) = -\operatorname{Tr}(\rho \log(\rho)). $$
As far as I understand, the algebras are associated with observables, not states (correct me if I'm wrong). So why is the type of algebra important? It seems to me that this should not affect the states. While $A$ is not trace class, $\rho \log(\rho)$ might be, because in principle $\rho$ doesn't need to be in $\mathcal{A}$.
Can someone clarify this point for me? With references if you have.