If the Advanced Tax feature is not enabled in the Account, then only S2 will be there as tax schedule and CHARGE TAX ON THIS SHIPPING PORTION OF ITEM field would not be a mandatory field in setting up the Shipping Item.
On Enabling Advanced Taxes, the tax schedule S1 will be created and the CHARGE TAX ON THIS SHIPPING PORTION OF ITEM field in Shipping Item must be selected since it became a mandatory field.
Select S1 if the shipping item is taxable and select S2 if the shipping item is not taxable.