Items can be broken by hitting them repeatedly with a weapon or hammer. They can also be broken by selecting the item in the player's inventory screen, clicking on the "eye" icon, and then selecting the "Break" button. Press left Ctrl while clicking this button to break more than one item at a time.
If breaking into pigment, less pigment will be produced than when using Any Hammer.
Note: some items only have the option to destroy, and you will not get any materials back.