diff --git a/ethchain/state_manager.go b/ethchain/state_manager.go
index d9831d49fb..95e46e41d5 100644
--- a/ethchain/state_manager.go
+++ b/ethchain/state_manager.go
@@ -114,13 +114,18 @@ func (sm *StateManager) ApplyTransactions(block *Block, txs []*Transaction) {
 			// Figure out if the address this transaction was sent to is a
 			// contract or an actual account. In case of a contract, we process that
 			// contract instead of moving funds between accounts.
+			var err error
 			if contract := sm.procState.GetContract(tx.Recipient); contract != nil {
-				sm.ProcessContract(contract, tx, block)
-			} else {
-				err := sm.Ethereum.TxPool().ProcessTransaction(tx, block)
-				if err != nil {
-					ethutil.Config.Log.Infoln("[STATE]", err)
+				err = sm.Ethereum.TxPool().ProcessTransaction(tx, sm.procState, true)
+				if err == nil {
+					sm.ProcessContract(contract, tx, block)
 				}
+			} else {
+				err = sm.Ethereum.TxPool().ProcessTransaction(tx, sm.procState, false)
+			}
+
+			if err != nil {
+				ethutil.Config.Log.Infoln("[STATE]", err)
 			}
 		}
 	}
@@ -318,4 +323,7 @@ func (sm *StateManager) ProcessContract(contract *Contract, tx *Transaction, blo
 		txData: nil,
 	})
 	closure.Call(vm, nil)
+
+	// Update the account (refunds)
+	sm.procState.UpdateAccount(tx.Sender(), caller)
 }
diff --git a/ethchain/transaction_pool.go b/ethchain/transaction_pool.go
index 4a4f2e809a..66828adfbf 100644
--- a/ethchain/transaction_pool.go
+++ b/ethchain/transaction_pool.go
@@ -90,7 +90,7 @@ func (pool *TxPool) addTransaction(tx *Transaction) {
 
 // Process transaction validates the Tx and processes funds from the
 // sender to the recipient.
-func (pool *TxPool) ProcessTransaction(tx *Transaction, block *Block) (err error) {
+func (pool *TxPool) ProcessTransaction(tx *Transaction, state *State, toContract bool) (err error) {
 	defer func() {
 		if r := recover(); r != nil {
 			log.Println(r)
@@ -98,7 +98,7 @@ func (pool *TxPool) ProcessTransaction(tx *Transaction, block *Block) (err error
 		}
 	}()
 	// Get the sender
-	sender := block.state.GetAccount(tx.Sender())
+	sender := state.GetAccount(tx.Sender())
 
 	// Make sure there's enough in the sender's account. Having insufficient
 	// funds won't invalidate this transaction but simple ignores it.
@@ -116,13 +116,15 @@ func (pool *TxPool) ProcessTransaction(tx *Transaction, block *Block) (err error
 	}
 
 	// Get the receiver
-	receiver := block.state.GetAccount(tx.Recipient)
+	receiver := state.GetAccount(tx.Recipient)
 	sender.Nonce += 1
 
 	// Send Tx to self
 	if bytes.Compare(tx.Recipient, tx.Sender()) == 0 {
 		// Subtract the fee
 		sender.Amount.Sub(sender.Amount, new(big.Int).Mul(TxFee, TxFeeRat))
+	} else if toContract {
+		sender.Amount.Sub(sender.Amount, new(big.Int).Mul(TxFee, TxFeeRat))
 	} else {
 		// Subtract the amount from the senders account
 		sender.Amount.Sub(sender.Amount, totAmount)
@@ -130,10 +132,10 @@ func (pool *TxPool) ProcessTransaction(tx *Transaction, block *Block) (err error
 		// Add the amount to receivers account which should conclude this transaction
 		receiver.Amount.Add(receiver.Amount, tx.Value)
 
-		block.state.UpdateAccount(tx.Recipient, receiver)
+		state.UpdateAccount(tx.Recipient, receiver)
 	}
 
-	block.state.UpdateAccount(tx.Sender(), sender)
+	state.UpdateAccount(tx.Sender(), sender)
 
 	log.Printf("[TXPL] Processed Tx %x\n", tx.Hash())