Would someone else care to explain why this is inappropriate?

Peanut, singing:  Santa's comin' tonight, tonight.  Santa's comin' tonight.
Me, ignoring him...
Peanut, singing:  Santa's comin' tonight, tonight.  Santa's comin' tonight.
Me, still ignoring him....
Peanut, singing:  Santa's comin' in meh butthole, Sant's comin' in meh butthole.
Me, no longer ignoring him:  Um, no!  Not appropriate.  Absolutely not.
Peanut:  What?  Why is that inappropriate?
Me, at a loss:  Because you can't say butthole.
Peanut:  We say butthole all the time.
Me:  It's not appropriate because I say so.  And I'm the Mom.
Peanut, sighing:  I don't get you.