@Clucas Yes, you should be able to do this with a Square tax rule.
In Square Dashboard go to:
Settings → Account & Settings → Payments → Sales taxes
Open your Wasilla 2.5% tax, then add a tax rule based on the total price. Square now supports tax exemption or reduction rules based on item price, total price, quantity, and other conditions.
Your goal is to have Square charge 2.5% on the first $500 only, so the tax should never exceed $12.50 on a single transaction.
One caution: make sure the rule is configured as a reduction/cap, not simply “make the whole sale tax-exempt once it exceeds $500,” because that would incorrectly remove the tax from the first $500 too.
If Square’s rule builder does not give you a way to preserve the first $500 as taxable while exempting only the amount above $500, I’d contact Square Support and ask specifically about a tax cap / maximum taxable amount rule for Wasilla, Alaska.
Here is Square's documentation on tax rules.
I see what you mean, in the Exemption the wording is if the item is under a certain amount, you need it to be over a certain amount. I would fill out a feature request and hope they could add it, I would think that would be an easy thing to add. Below is the link to feature requests.
https://community.squareup.com/t5/Feature-Requests/idb-p/product-ideas
