Yes, yes it does.
And RETURN (which you'll use to separate paragraphs because you can't indent) will cost you 2 spaces.
EDIT: When you're using MS Word, go to Tools, Word Count, and Characters with spaces should give you what your count is. Don't forget to add in the space between paragraphs. 🙂
you should not attempt to indent because when you paste the text into the designated box, you lose all formatting. at the end of each paragraph, you should hit return twice to skip a line (it only counts 2 characters for that).