"Shack" is a nickname that was used for any kind of eatery, especially a roadside restaurant that might have a limited menu, like 'taco shack', 'burger shack', 'hotdog shack'; literally, a 'sugar shack' would sell sugar.
At the time 'Sugar' was also drug slang for heroin, perhaps because of it's white color.
In the song, the singer is infatuated with a 'girlie' who is a waitress in leotards and barefoot, who works at a shabby coffeehouse located 'beyond the tracks', suggesting a seedy area.
Heroin addicts at the time were known to frequent coffee houses rather than bars (because alcohol and heroin can lead to death from decreased heart rate). But it is unlikely that the writer was trying to disguise a heroin reference, but rather use the name as an all-knowing, hipster nod to the drug world. The use of the name in this way would be ironic -as a knowing (perhaps derogatory) term for a hang-out that also happened to attract heroin users, even though the management and help might merely be indifferent or tolerant of those addicts who had a natural attraction to such a place, just like cockroaches are drawn to a dirty sink.