Nose Down, Eyes Up by Merrill Markoe

Gil, who converses with his dogs, has a problem with Dink, the dog who can't remember the difference between "inside" and "outside."
...the other dogs all ran out into the yard. Only Dink stopped and came over to consult with me for a minute.

"Right now: Are we inside or outside?" she asked.

"You're inside," I said.

"Oh, good," she said, as she began to squat and pee.

"NOOO," I said, picking her up and quickly carrying her outside, where I deposited her on the lawn. "Pee outside."

"Right. Right. Got it," she said as she squatted on the grass.
Later:
"Okay. I have one other question about being here," said Dink. "Should I pee in the outside where the trees are or the outside where the stove is?"

"The stove is inside," I sighed.

"Right, right, I knew that," said Dink. "I got confused for a second because I always pee wherever there are rugs."

"Yes, but that is always wrong," I said. "Rugs are inside."

"When did that start?" said Dink.
-- from the novel Nose Down, Eyes Up, by Merrill Markoe