How do you convert a Client - Client Event to a Server - Client?

Okay, so the item is the thing you want to destroy on the server? if so doing it in a local script wont work as it's only destroying it for the client. Anyway, you should use a RemoteEvent to fire the server from the local script then copy the code from the second script and paste it into a Server Script, and use Event.OnServerEvent()

First Script (Local Script):

local UIS = game:GetService("UserInputService")
local pickupHotkey = "E"

local plr = game.Players.LocalPlayer
local mouse = plr:GetMouse()

local PlayerGUI = plr:WaitForChild("PlayerGui")
local PickupGUI = PlayerGUI:WaitForChild("PickUpGUI") 

local Slot1EventWood = game.ReplicatedStorage.Slot1Wood

UIS.InputChanged:Connect(function(input)
    if mouse.Target then
    if mouse.Target:FindFirstChild("Pickup") then
        local item = mouse.Target
        PickupGUI.Adornee = item
        PickupGUI.ObjectName.Text = item.Name
        PickupGUI.Enabled = true
    else
        PickupGUI.Adornee = nil
        PickupGUI.Enabled = false
    end
    end
end)

UIS.InputEnded:Connect(function(input)
    if input.KeyCode == Enum.KeyCode[pickupHotkey] then
    if mouse.Target then
        if mouse.Target:FindFirstChild("Pickup")then
        local item = mouse.Target
        if item then
            local distanceFromItem = plr:DistanceFromCharacter(item.Position)
            if distanceFromItem < 20 then
                if item.Name == "Wood" then
                    Slot1EventWood:FireServer()
                end
            end
        end
        end
    end
    end
end)

Second Script (Server Script):

local Slot1EventWood = game.ReplicatedStorage.Slot1Wood

Slot1EventWood.OnServerEvent:Connect(function(plr)

    local mouse = plr:GetMouse()

    repeat wait() until mouse.Target ~= nil

            local item = mouse.Target

            print("Client Received the Event")
               if script.Parent.QuantitiyVal == 1 then
               print("No room >:)")
                   if script.Parent.Item == "Wood" then
                     print("Room due to stacking")
                    elseif script.Parent.QuantitiyVal == 99 then
                        print("No room due to max stack limit")
                    end
                else
                    if item.Name == "Wood" then
                     item:Destroy()
                     end
               print("Room")
               script.Parent.Item.Value = "Wood"
               script.Parent.QuantitiyVal.Value = script.Parent.QuantitiyVal.Value + 1
               script.Parent.Visible = true
               script.Parent.Quantity.Text = script.Parent.QuantitiyVal.Value
    end
end)

Hopefully this works. If this isn't what you were asking for just post a comment below and I'll try to help you.

for xInfinityBear

local Slot1EventWood = game.ReplicatedStorage.Slot1Wood
local mouse = plr:GetMouse()
Slot1EventWood.OnServerEvent:Connect(function(plr)
    if mouse.Target == nil then return end

    local item = mouse.Target

    print("Client Received the Event")
        if script.Parent.QuantitiyVal == 1 then
            print("No room >:)")
            if script.Parent.Item == "Wood" then
                print("Room due to stacking")
            elseif script.Parent.QuantitiyVal == 99 then
                print("No room due to max stack limit")
            end
        else
            if item.Name == "Wood" then
                item:Destroy()
            end
            print("Room")
            script.Parent.Item.Value = "Wood"
            script.Parent.QuantitiyVal.Value = script.Parent.QuantitiyVal.Value + 1
            script.Parent.Visible = true
            script.Parent.Quantity.Text = script.Parent.QuantitiyVal.Value
        end
    end)