diff --git a/src/prefect/task_engine.py b/src/prefect/task_engine.py
index 242730cd5cf2..7c39dcc5d6c7 100644
--- a/src/prefect/task_engine.py
+++ b/src/prefect/task_engine.py
@@ -69,7 +69,7 @@
     exception_to_failed_state,
     return_value_to_state,
 )
-from prefect.transactions import Transaction, TransactionState, transaction
+from prefect.transactions import Transaction, transaction
 from prefect.utilities.annotations import NotSet
 from prefect.utilities.asyncutils import run_coro_as_sync
 from prefect.utilities.callables import call_with_parameters, parameters_to_args_kwargs
@@ -403,7 +403,8 @@ def handle_success(self, result: R, transaction: Transaction) -> R:
         )
         transaction.stage(
             terminal_state.data,
-            on_rollback_hooks=[
+            on_rollback_hooks=[self.handle_rollback]
+            + [
                 _with_transaction_hook_logging(hook, "rollback", self.logger)
                 for hook in self.task.on_rollback_hooks
             ],
@@ -515,6 +516,18 @@ def record_terminal_state_timing(self, state: State) -> None:
                         state.timestamp - self.task_run.state.timestamp
                     )
 
+    def handle_rollback(self, txn: Transaction) -> None:
+        # transaction rollbacks can occur outside of the engine's context
+        # so we need to ensure a client is available
+        with ClientContext.get_or_create() as client_ctx:
+            self.set_state(
+                Completed(
+                    name="RolledBack",
+                    message="Task rolled back as part of transaction",
+                ),
+                client=client_ctx.sync_client,
+            )
+
     @contextmanager
     def setup_run_context(self, client: Optional[SyncPrefectClient] = None):
         from prefect.utilities.engine import (
@@ -725,22 +738,6 @@ def start(
     def transaction_context(self) -> Generator[Transaction, None, None]:
         result_factory = getattr(TaskRunContext.get(), "result_factory", None)
 
-        def __prefect_set_task_state_to_rolled_back(txn: Transaction):
-            if txn.state != TransactionState.STAGED:
-                # there's nothing to rollback so don't set the state to rolled back
-                # For example, a task that raises an unhandled exception while running
-                # does not trigger any on_rollback hooks b/c the transaction was never staged.
-                return
-
-            with ClientContext.get_or_create() as client_ctx:
-                self.set_state(
-                    Completed(
-                        name="RolledBack",
-                        message="Task rolled back as part of transaction",
-                    ),
-                    client=client_ctx.sync_client,
-                )
-
         # refresh cache setting is now repurposes as overwrite transaction record
         overwrite = (
             self.task.refresh_cache
@@ -752,7 +749,6 @@ def __prefect_set_task_state_to_rolled_back(txn: Transaction):
             store=ResultFactoryStore(result_factory=result_factory),
             overwrite=overwrite,
             logger=self.logger,
-            on_rollback_hooks=[__prefect_set_task_state_to_rolled_back],
         ) as txn:
             yield txn
 
diff --git a/src/prefect/transactions.py b/src/prefect/transactions.py
index 8a9e65e48be7..41c6c07d3001 100644
--- a/src/prefect/transactions.py
+++ b/src/prefect/transactions.py
@@ -254,7 +254,6 @@ def transaction(
     commit_mode: Optional[CommitMode] = None,
     overwrite: bool = False,
     logger: Optional[PrefectLogAdapter] = None,
-    **kwargs,
 ) -> Generator[Transaction, None, None]:
     """
     A context manager for opening and managing a transaction.
@@ -316,6 +315,5 @@ def transaction(
         commit_mode=commit_mode,
         overwrite=overwrite,
         logger=logger,
-        **kwargs,
     ) as txn:
         yield txn