diff --git a/libraries/physics/src/EntityMotionState.cpp b/libraries/physics/src/EntityMotionState.cpp
index 5fc5f7688b..2d01d49639 100644
--- a/libraries/physics/src/EntityMotionState.cpp
+++ b/libraries/physics/src/EntityMotionState.cpp
@@ -52,25 +52,22 @@ void EntityMotionState::getWorldTransform (btTransform &worldTrans) const {
 // This callback is invoked by the physics simulation at the end of each simulation frame...
 // iff the corresponding RigidBody is DYNAMIC and has moved.
 void EntityMotionState::setWorldTransform (const btTransform &worldTrans) {
-    uint32_t dirytFlags = _entity->getDirtyFlags();
-    if (! (dirytFlags &  EntityItem::DIRTY_POSITION)) {
-        glm::vec3 pos;
-        bulletToGLM(worldTrans.getOrigin(), pos);
-        _entity->setPositionInMeters(pos + ObjectMotionState::getWorldOffset());
-    
-        glm::quat rot;
-        bulletToGLM(worldTrans.getRotation(), rot);
-        _entity->setRotation(rot);
-    }
+    glm::vec3 pos;
+    bulletToGLM(worldTrans.getOrigin(), pos);
+    _entity->setPositionInMeters(pos + ObjectMotionState::getWorldOffset());
 
-    if (! (dirytFlags &  EntityItem::DIRTY_VELOCITY)) {
-        glm::vec3 v;
-        getVelocity(v);
-        _entity->setVelocityInMeters(v);
-        getAngularVelocity(v);
-        _entity->setAngularVelocity(v);
-    }
-    _outgoingDirtyFlags = OUTGOING_DIRTY_PHYSICS_FLAGS;
+    glm::quat rot;
+    bulletToGLM(worldTrans.getRotation(), rot);
+    _entity->setRotation(rot);
+
+    glm::vec3 v;
+    getVelocity(v);
+    _entity->setVelocityInMeters(v);
+
+    getAngularVelocity(v);
+    _entity->setAngularVelocity(v);
+
+    _outgoingPacketFlags = DIRTY_PHYSICS_FLAGS;
 }
 #endif // USE_BULLET_PHYSICS
 
diff --git a/libraries/physics/src/EntityMotionState.h b/libraries/physics/src/EntityMotionState.h
index 562efde87e..3391ed3020 100644
--- a/libraries/physics/src/EntityMotionState.h
+++ b/libraries/physics/src/EntityMotionState.h
@@ -56,7 +56,6 @@ public:
 
     uint32_t getIncomingDirtyFlags() const { return _entity->getDirtyFlags(); }
     void clearIncomingDirtyFlags(uint32_t flags) { _entity->clearDirtyFlags(flags); }
-    void clearConflictingDirtyFlags() { _outgoingDirtyFlags &= ~_entity->getDirtyFlags(); }
 
 protected:
     EntityItem* _entity;
diff --git a/libraries/physics/src/ObjectMotionState.cpp b/libraries/physics/src/ObjectMotionState.cpp
index b80a996d0c..e2fd2b7a66 100644
--- a/libraries/physics/src/ObjectMotionState.cpp
+++ b/libraries/physics/src/ObjectMotionState.cpp
@@ -52,7 +52,7 @@ ObjectMotionState::ObjectMotionState() :
         _body(NULL),
         _sentMoving(false),
         _weKnowRecipientHasReceivedNotMoving(false),
-        _outgoingDirtyFlags(0),
+        _outgoingPacketFlags(0),
         _sentFrame(0),
         _sentPosition(0.0f),
         _sentRotation(),
diff --git a/libraries/physics/src/ObjectMotionState.h b/libraries/physics/src/ObjectMotionState.h
index 1341cb6168..ec9900a6be 100644
--- a/libraries/physics/src/ObjectMotionState.h
+++ b/libraries/physics/src/ObjectMotionState.h
@@ -81,8 +81,7 @@ public:
 
     virtual uint32_t getIncomingDirtyFlags() const = 0;
     virtual void clearIncomingDirtyFlags(uint32_t flags) = 0;
-    void clearOutgoingDirtyFlags(uint32_t flags) { _outgoingDirtyFlags &= ~flags; }
-    virtual void clearConflictingDirtyFlags() = 0;
+    void clearOutgoingPacketFlags(uint32_t flags) { _outgoingPacketFlags &= ~flags; }
 
     bool isAtRest() const { return !(_body->isActive()) && _weKnowRecipientHasReceivedNotMoving; }
     virtual bool shouldSendUpdate(uint32_t simulationFrame, float subStepRemainder) const;
@@ -105,7 +104,7 @@ protected:
     bool _sentMoving;   // true if last update was moving
     bool _weKnowRecipientHasReceivedNotMoving;
 
-    uint32_t _outgoingDirtyFlags;
+    uint32_t _outgoingPacketFlags;
     uint32_t _sentFrame;
     glm::vec3 _sentPosition;
     glm::quat _sentRotation;;
diff --git a/libraries/physics/src/PhysicsEngine.cpp b/libraries/physics/src/PhysicsEngine.cpp
index 9fb6bdfe26..9d3f8d80b7 100644
--- a/libraries/physics/src/PhysicsEngine.cpp
+++ b/libraries/physics/src/PhysicsEngine.cpp
@@ -9,8 +9,9 @@
 //  See the accompanying file LICENSE or http://www.apache.org/licenses/LICENSE-2.0.html
 //
 // TODO DONE: make _incomingChanges to be list of MotionState*'s.
-// TODO: make MotionState able to clear incoming flags
+// TODO DONE: make MotionState able to clear incoming flags
 // TODO: make MotionState::setWorldTransform() put itself on _incomingChanges list
+// TODO: make sure incoming and outgoing pipelines are connected
 // TODO: give PhysicsEngine instance an _entityPacketSender
 // TODO: provide some sort of "reliable" send for "stopped" update
 
@@ -38,16 +39,16 @@ PhysicsEngine::~PhysicsEngine() {
 
 // begin EntitySimulation overrides
 void PhysicsEngine::updateEntitiesInternal(const quint64& now) {
-    QSet<ObjectMotionState*>::iterator stateItr = _outgoingPhysics.begin();
+    QSet<ObjectMotionState*>::iterator stateItr = _outgoingPackets.begin();
     uint32_t frame = getFrameCount();
     float subStepRemainder = getSubStepRemainder();
-    while (stateItr != _outgoingPhysics.end()) {
+    while (stateItr != _outgoingPackets.end()) {
         ObjectMotionState* state = *stateItr;
         if (state->shouldSendUpdate(frame, subStepRemainder)) {
             state->sendUpdate(_entityPacketSender);
             ++stateItr;
         } else if (state->isAtRest()) {
-            stateItr = _outgoingPhysics.erase(stateItr);
+            stateItr = _outgoingPackets.erase(stateItr);
         } else {
             ++stateItr;
         }
@@ -106,7 +107,6 @@ void PhysicsEngine::relayIncomingChangesToSimulation() {
     QSet<ObjectMotionState*>::iterator stateItr = _incomingChanges.begin();
     while (stateItr != _incomingChanges.end()) {
         ObjectMotionState* motionState = *stateItr;
-        motionState->clearConflictingDirtyFlags();
         uint32_t flags = motionState->getIncomingDirtyFlags() & DIRTY_PHYSICS_FLAGS;
 
         btRigidBody* body = motionState->_body;
@@ -121,7 +121,13 @@ void PhysicsEngine::relayIncomingChangesToSimulation() {
             }
         }
 
-        motionState->clearIncomingDirtyFlags(flags);
+        // NOTE: the order of operations is:
+        // (1) relayIncomingChanges()
+        // (2) step simulation
+        // (3) send outgoing packets
+        // This means incoming changes here (step (1)) should trump corresponding outgoing changes
+        motionState->clearOutgoingPacketFlags(flags); // trump
+        motionState->clearIncomingDirtyFlags(flags); // processed
         ++stateItr;
     }
     _incomingChanges.clear();
diff --git a/libraries/physics/src/PhysicsEngine.h b/libraries/physics/src/PhysicsEngine.h
index c0145cca0f..9d02486ec1 100644
--- a/libraries/physics/src/PhysicsEngine.h
+++ b/libraries/physics/src/PhysicsEngine.h
@@ -107,7 +107,7 @@ private:
     // EntitySimulation stuff
     QSet<EntityMotionState*> _entityMotionStates; // all entities that we track
     QSet<ObjectMotionState*> _incomingChanges; // entities with pending physics changes by script or packet
-    QSet<ObjectMotionState*> _outgoingPhysics; // MotionStates with pending transform changes from physics simulation
+    QSet<ObjectMotionState*> _outgoingPackets; // MotionStates with pending changes that need to be sent over wire
 
     EntityEditPacketSender* _entityPacketSender;