In SoS' universe, there are multiple stages of possession. The first stage is just the demon kind of "influencing" a human's thoughts. The second stage is partial possession, where the demon periodically "takes over" the human's actions as well. Then the final stage, which is full possession - the human has no control at this stage and the demon is completely "inside" them. Sabrina thinks Sin is the demon possessing him, but since she can see Sin, it means that they're only influencing him - only at stage 1. This means the holy water wouldn't affect anything... 👀