Question

where does the sugar go when dissolved in water

Answer 1

Sugar particles contain molecules of Sucrose.  That organic compound contains O-H  oxygen hydrogen bonds.  The chemical bond is slightly polar.  The water molecules contain O - H bond too.  So the molecules get slightly polarised and then there is a force of attraction between them.

So the sugar molecules separate from each other and get attracted to water molecules.  They get separated and so become liquid and mix with water this way.  Liquid sugar is color less.