How do i handle an item where buyer was local and i need to void shipping and do local pickup

[crcof_84]

Item needs to be picked up locally. How to handle running payment through without shipping and arrange pickup 

[wooden_flower]

The best thing to do is to cancel as problem with address, relist with local pickup, and have the buyer purchase it again.

If you are not willing to do that, you can manually refund the shipping - in your list of sold orders select send refund.  Then after pickup, select 'mark as shipped'.  You'll have to wait longer for your payment, since you have no proof of delivery.