You can click & drag to house an entire category within a different category as a subcategory, @Britany.
I'm not sure if this will work to accomplish what you want, but I'll include a few screenshots as an example. You'll start by heading to your Square Online overview page > Items > Categories > click on the category you want to move, and hold down the button while you start to drag the category:
This is what it will look like when you are mid-drag:
Once you drop the category into the other category, you'll see this:
You can do the same thing with individual items within categories as well! Just click & drag to move items from one category into another - in this example I moved Coffee and Other from the Beverage category to the Apparel category:
Please let me know if this isn't what you were looking to do so I can dig in a bit more here ✨
