I have never done this, but ....

In Sales Tax Code Maintenance there is a taxable limit field. So my guess is that you would need two tax codes for your city – one for 0.5% with a $5000 limit and one for 2.0% with no limit. Then use both codes in your tax schedule, along with your state & county & whatnot codes.

Then test it to see how it actually works.

It worked exactly as it was supposed to by following exactly as you listed. Thank You!