The announcement, made last Thursday, caused share prices to fall nearly two cents, dipping just below $37 a share at the start of this week, representing a fall of more than two per cent.
Share price have since started to slightly recovered and finished trading at above the $37 mark at the close of trade on Monday.
The fact that the investment world was already aware of the tax investigation and that Estee Lauder had accounted for it, means that it is expected to have a limited impact on Estee Lauder's stock market or financial status.
The company said that the tax settlement relates to previously disclosed issues raised during IRS investigation for the financial period from June 30, 1998 through to June 30, 2001 for company income tax returns.
The IRS investigated transfer pricing and foreign tax credit computations during this period. Estee Lauder said that as a result of these investigations its fiscal 2006 net earning would be reduced by approximately $46m.
However, the company said that in anticipation of this expense, it had made a cash payment to the US Treasury of approximately $70m at the end of June, a payment that also reflected added taxes and interest relating to the period, as well as a transfer pricing issue relating to the financial year from 2002, through to 2004.
Likewise, the company also completed the repatriation of foreign earnings in the fourth quarter of 2006, which it said resulted in a favorable adjustment to its tax bill of $11m relating to the company's $35m tax charge recorded in 2005.
With the bottom line now expected to be hit by $35m, the company says it will be announcing its full year financial results for 2006 on August 16.
Estee Lauder has been struggling to maintain its position in the world cosmetics market in the face of tough competition, particularly in the US market and implemented a cost restructuring programme last year to tackle its problems.
This included the streamling of processes and organizational changes as well as 'aggressive' reduction of indirect procurement and non-critical spending.
At the time the company said it was counting on these measures bringing about a considerable turn around in its performance during the course of 2006, expecting that the measures would deliver cost savings of $40 - $45 million on trading up to June this year.