"He eats that salt."
Translation:O, o tuzu yer.
You're not wrong, it's just that both o and şu mean "that" in Turkish. O is just used for something farther away. It's difficult to explain because the distinction doesn't exist in English.
As invisibleteacup explained above:
bu - near the speaker
şu - "between" speaker and listener (or just relatively nearby)
o - at a considerable distance