what reader are you seeing this on? i believe that the desktop nook reader software will auto-indent paragraphs unless you've explicitly declared text-indent: 0; in the css. i don't think it's unlikely that other e-readers also exhibit this behaviour.
the spacing between <p> tags probably is the result of padding-top or -bottom in the css, unless there are empty paragraph tags in the html itself (<p> </p>)
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