I must say, I didn't expect you have to have such interest in this sort of thing. It actually has quite a bit of potential to be quite... intriguing. Unfortunately, your rather spare writing style, while suitable for certain genres of story, doesn't really fit erotic literature very well. I'll try to give examples as I go through the story.

Once there was a normal, everyday, regular pony. She was a hard worker who did her best to help out other ponies. Everypony thought she did a pretty good job at that. She didn't like showing off or anything as long as she could help. One night, after the rest of her family had gone to bed, she got up. She quietly snuck out of the house. She went into town. Everypony else was asleep. There was nopony else around. She went to one of the houses. Every Friday night, she went to that house, to the back door. She knocked.

"Who is it?"

"It's me."

Okay, the description is kinda brief and so generic that it doesn't really tell the reader anything about the protagonist. It doesn't help that there's no description of her appearance. We don't even get a name. Now, this might be helpful if you want the reader to imagine themselves in the place of the protagonist, but if that's the case, the stuff about how she helps other ponies isn't really necessary. You jump to the... action so quickly that the the background info isn't really important. If you want some legitimate characterization, you'll have to put a lot more effort in.

"Oh, come in, Callery!"

The door swung open and she walked in. There was another pony there.

"I'll be ready in just a moment," she said. "You can go to the room."

So she went to the room.

Okay, it's good that you gave your character a name, but as they're both female, if you just use "she" it's impossible to tell who's talking or doing what. Also, you have an absolute bare minimum of description here; you might want to consider adding some more detail to the description. What the ponies look like, what kind of house it is, etc. Otherwise it's hard to get invested in the story.

There was a large bed in the room, and also a few large closets. She sat and waited. Then the door opened and the other pony came in. She was wearing a lot of tight belts. Some of them had spikes.

Oh boy, here we go.

"I'm sorry I'm late," she said. "I had to-"

"Silence!" said the other pony. "How dare you not get here when I told you to!"

"I'm real sorry, I just-"

"I said silence," said the pony. "And you should know by now that you are to address me as your mistress!" The mistress pushed Callery to the floor. "You are being quite a naughty pony! That means you need to be punished!"

The mistress opened one of the closets and took out a bridle an put it on Callery. Then she tied up Callery's legs and put her on the bed.

Okay, the description here is quite bland. I get the idea you're sort of going for a "bondage dungeon" vibe here, but it isn't really coming across. It's just a bedroom that happens to have a few extra cabinets. If you offered a bit more detail, you'd be able to pique the reader's interest better. For instance, maybe when the mistress opens one of the closets, you could note some of the other contents. Maybe she has like some whips or something. You also should flesh out the description of the actions a bit better as well; maybe figure out exactly how Callery gets tied up. I'm no expert on... this subject, but I'm pretty sure there are plenty of different ways to tie somepony up. Some more detail would help the reader picture the scene better. Like maybe all four of her limbs are tied together and stuck in the air. Kinda like how you tied up Fluttershy during the Discord incident. I know you know your way around knots. You can find a better way of describing this.

"You have been naughty, haven't you?"

Callery nodded.

"I said, 'Have you been naughty?' Answer me!"

"Y-yes!"

The mistress took a switch out of the cabinet and smacked Callery's rump with it.

"I didn't hear you!" the mistress said.

"Yes!" Callery said.

"Louder!"

"YES!"

"Were you a naughty pony?"

"Yes, I was a naughty pony!"

The mistress smacked Callery's rump again.

"Call me by my title!"

"I was a naughty pony, Mistress!"

"And what does that mean?"

"That you have to punish me,Mistress."

"That's right. You've been a very naughty pony, so now I have to spank you!"

So she spanked her.

Okay, the descriptions of what's going on here is so simple that it basically loses any of the eroticism it could have had. I suppose it would be possible to eroticize something like spanking, but "she spanked her" is anything but erotic. It says what's happening, but it doesn't exactly paint a mental picture of what's happening. It's more like the events are just being summarized rather than described. It's the same deal with describing how she's tied up. Like instead of just saying that she's being spanked, you need to describe it. The sound of the switch hitting her, for example. Or describe how she looks. Does she twitch? Maybe she cries out, or moans, or squeaks or something. It could start quiet and get gradually louder with each successive strike. You could also describe the effect of the spanking. Is her butt getting red as a result of the spanking? Give the reader some details.

The entire point of erotic fiction is to arouse the reader by allowing them to vicariously experience the events of the story. If you don't describe any of the sensations that the characters are feeling, that's almost impossible. You need to pick one of the characters and describe what they're experiencing. Like for Callery, you could describe what it feels like to be spanked. Sudden pain, with tingly feeling after. A growing soreness as she takes more and more hits. Maybe her legs start to fall asleep from being tied up, and the spanking brings the feeling back. Just give the reader something that consists of more than just "this happened".

"Ouch!" said Callery.

You know what I said before about giving more detail? This is not sufficient.

"I don't think you've been punished enough!" said the mistress. "What do you think? Have you been punished enough?"

"No, Mistress. I've been a bad pony and I need to be punished more."

"That's right," said the mistress.

"How are you going to punish me?" asked Callery.

"Silence!" said the mistress. "How dare you question me!"

"I am sorry, Mistress!" said Callery. "You'll have to punish me even more now."

"Yes, and I have just the thing." The mistress opened one of her cabinets and took out a candle. She lit it and began to drip the wax on Callery's chest.

There are so many sensual details you could include here, just from the candle alone; the heat, the smell of the wax and flame, the flicking light, the sound of the drips hitting her, the feeling of the hot wax seeping through her coat... there has to be some substance to the image.

"Ouch!" Callery said.

Oh come on, you can do better than this. This is the exact same thing she said during the spanking (or should have said multiple times, given that each hit is separate), and it's kind of a dull reaction. I can think of other ways somepony might react to having hot wax dripped on them. Like maybe she tries to keep quiet, but she involuntarily whimpers as the hot wax lands on her; biting her lip and trying to keep her breathing even despite the pain. As she gets used to the heat, the burning sensation starts to be pleasurable. Or something like that.

"How does that feel?" said the mistress.

"It hurts!" Callery said. "But in a good way."

Okay, this is way too blunt. "It hurts in a good way?" Really? I know you can do better than that. I said it once I'll say it again, describe the sensations. It's almost impossible to get into what's going on when there's no feeling involved.

"Good." said the Mistress. "But I still have to punish you more. Now lick my hoof!"

She put her hoof by Callery's mouth, and Callery licked it.

1. Keep in mind what I said before.

2. This is a good example of a problem I've noticed, neither character is very dynamic. BDSM is all about a power dynamic; one dominant pony exerting complete power over another fully submissive pony. However, that dynamic doesn't seem to appear here. Callery and the Mistress fill those roles in name only. They're doing what you'd expect in that situation, but it's unnatural. It feels like they're going through the motions. They're doing what they're doing because that's what the story requires rather than because they have any reason for it. For instance, the Mistress doesn't really act like a dom; she says things that are appropriate for the situation, but she lacks any mannerisms or body language to go along with it. When she says the lines I'm just imagining a pony just standing there reciting the lines on cue rather than a scene playing out. Callery is the same way; she doesn't really act all that submissive. Or rather, there's no well to tell whether she's submissive or not because I have no idea how she's talking or acting. Half the story is just Callery and the Mistress trading lines. It's almost like a play; all dialogue with occasional scene description and stage direction.

Come to think of it, it might actually work better as a play because then the actors could figure out the body language, tone, and all of that. Although I doubt you'd be able to stage such a play in Ponyville; and if you could it would have to be pretty low key. You'd have a hard time getting actors as well. I suppose if you were really hard pressed, Rarity might be willing to play the part of the mistress. I could kind of see her acting in that fashion. I'm pretty sure she's made bridles before. In fact, she could probably make most of the paraphernalia that would be required for that role.

As for Callery, that's tougher. Fluttershy is the obviously choice for a sub, but I don't think she'd ever really want to do something like that, even as part of a play. She has enough trouble going onstage in a non-erotic role, let alone one that would show her in such a... compromising position. Pinkie would never be able to pull it off; she'd laugh the whole time. Rainbow Dash doesn't seem like the sub type either. Then again, when she was telling me about how Spitfire was constantly going all drill-sergeant on her, she seemed to almost enjoy it, so maybe she's secretly into that kind of thing. Though it might just be because it's the Wonderbolts doing the dominating.

I don't know who else you'd get to do it, though. I mean, if it weren't kind of an embarrassing thing to act out publicly, I might take a swing at it. I mean, it couldn't be that bad. It's not like it would be Celestia spanking me or dripping hot wax on my chest or anything. Not like she ever had any occasion to chastise me, though. I was always really careful to have everything in on time. Although I kind of wonder what it would have been like if she had? I mean, I'm sure it would have hurt a bit, but she knows her own strength well enough to not do any real damage. She'd probably know just how to bend me over and really go to town on my behind!

Don't know about the candle thing, though. She might be able to magically manipulate the temperature of the wax to be just right; hot enough to sting but not enough to actually burn. I don't know if it fits with her aesthetic though. Luna is the one who's more likely to have candelabras sitting everywhere. The whole "black leather straps" that most doms wear probably fits her general fashion tendencies as well. Very dark and gothic. Come to think of it, both Celestia and Luna would look good in dominatrix style getups. Really good. I mean, I usually get disturbing mental images from reading these stories, but that one is actually quite... okay, I should stop talking about this. It's too much of a tangent.

Back to the story.

"How does it taste?" asked the mistress.

"I love it," said Callery.

"Good," said the mistress. "Lick it some more."

"Yes, Mistress!" Callery said. She licked the Mistress' hoof again. Then an alarm clock rang.

"Woops, looks like our time is up!" The mistress said. She untied Callery. "You'd better get home before somepony realizes that you're missing."

Wait wait wait. This is far too anticlimactic. The entire scene just sort of... stops. If you're going for a deliberate anti-climax, you have to build up to something before pulling the rug out from under the reader. As is, the story doesn't have any direction, it's just a link of things that happen rather than an actual narrative. You should play up the intensity of the scene before suddenly cutting it off. Like maybe consider moving the hoof-licking thing to the start of the story; it's the least extreme of the things that happen, so it comes across as an anti-climax after the spanking and the hot wax.

"Thanks." Callery said. "Same time next week?"

"Sure." The mistress winked. "I hope you're late again."

Oooooh! See, this is good. It makes the mistress seem playful and a bit of a tease. It gives her some real personality. You need more stuff like this in the story.

"Alright." Callery said as she walked back to the outside door. "Maybe next time I'll show up even later."

Why couldn't you have had this banter stuff earlier? It would have established their personalities at the start and made their relationship feel more real. You should consider opening the story with this sort of interaction.

"Oh, and before I forget..." the Mistress said. "Please make sure your little sister remembers to do her homework. She forgot it yesterday."

"Okay," Callery said with a smile. "I'll make sure I remind her. See you later."

"Bye."

"Bye."

Wait, so the dominatrix was her little sister's schoolteacher? Are you telling me that you're aware of Cheerilee's... alternate revenue stream? (If you weren't, don't tell her that I let you know. I only found out because she came into the library for "research materials"). Anyway, it kind of comes out of nowhere, but it's actually a pretty great twist. The problem is that the lack of detail up to this point means that the reader probably won't be invested enough to really appreciate it. So basically there are two things you need to do when you edit this:

1. Develop the characters' personalities more. Take the banter between them at the very end and add some of that to the rest of the story. They need to have distinct voices.

2. Describe the actual sensations that Callery is experiencing. Otherwise it'll be hard for the audience to truly... enjoy the story. They can't get the vicarious experience of what happens if the events are only loosely summarized in a bland fashion. You need to emphasize the tastes, feels, smells, sounds, and appearance of what happens. Otherwise I- I mean, your readers won't find it arousing.

Basically, you have the potential for something sexy here, but the prose is distressingly beige. You obviously don't want to go overboard with it, but for something like this a little bit of florid-ness is just what the story needs.

Author's Note

Note: I know absolutely nothing about BDSM culture, so I'm basically taking the stuff I've picked up by osmosis and running with it. I do kinda think it works though; it would be just like AJ to be interested in it, but not know much about how it works.

Also, this is relevant.