What happens if I exceed Steam's transaction threshold?

So, to be clear, crossing either threshold is not what makes your income via the steam community market taxable. That is something that will vary wildly from jurisdiction to jurisdiction, and across a variety of financial circumstances. You should know, however, that in many cases, income from the Steam community market is taxable well before you have conducted twenty thousand dollars in transactions. Consult a qualified tax professional or accountant in your area if you are doing any significant amount of business through Steam and have any concerns about this matter.

What you're referring to is a practice by valve, in which, once you have both sold 200 items and exceeded 20,000 dollars in transaction value, you will receive an IRS form 1099 declaring that income at the end of the year. Valve requests the information neccesary to do this when you have crossed either one threshold, to keep them on file and use them as neccesary.

From Valve's FAQ on the subject:

Will you be providing 1099’s based on my transactions in the Community Market?
The United States Internal Revenue Service requires us to report gross sales for, and provide IRS Form 1099’s to, only those subscribers who are U.S. citizens or residents and who exceed 200 sales transactions in a calendar year and also exceed $20,000 in gross sales proceeds from those sales transactions in that same calendar year, from all of the subscriber's accounts. If you are a U.S. citizen or resident and exceed both of these thresholds, we will report the amount of gross sales to the IRS and provide you with Form 1099.
Do I have to pay income taxes on the proceeds of sales I make in the Community Market?
Different countries have different rules relating to the taxation of digital transaction. For U.S. citizens and residents, as discussed above, we are obligated to collect certain taxpayer identifying information from those who engage in more than 200 transactions in a calendar year, but no information is reported to the U.S. Internal Revenue Service unless your gross revenues from such sales exceed $20,000. Ultimately, the responsibility for determining any income tax liabilities, which you may or may not have, rests with you. If you are concerned about your liability, you should consult a tax advisor.

If you do over sell over $20,000 worth of products, you are legally required to pay taxes for it. This isn't a requirement by Steam, but one by Internal Revenue Service under Internal Revenue Code section 6050W.

If you pass 200 transactions in sales in a Calender Year, you'll be asked to fill a 1099 tax form, again required by IRS. Once you pass $20,000, your sales will be reported to IRS if you are a USA citizen or resident (and you may be taxed for it, if you want a total clarification, consult a qualified tax professional or accountant in your area as LP_MF stated).