Leather is actually a part of a creature's anatomy. It's part of the STANDARD_MATERIALS package which has the skin, the bone, the meat, the eyes, the whole lot. Even if there's no reasonable way to get it, it doesn't stop them from adoring the leather of gibbons and turkeys. You could make the reaction put out weird no-material TANNED_HIDE items, but I'm fairly confident that the stock leatherworking reactions would throw a fit at the sight of those.
Leather doesn't really exist as a generic concept. All leather is xyz leather. The way Masterwork did it was to make a non-existent dummy animal "whose" leather (free of all prefixes, of course) all tanned hides turned into. I don't know if there are better ways, Meph has probably bashed his head into plenty of walls before coming to that solution.
Actually, now that you mention it, I'm pretty sure this was actually the way I went about it too, seeing as the game threw a bunch of errors when I tried using :NONE:NONE:NONE. Thank you for pointing this out. Essentially, create a creature without a name, then change [MATERIAL_REACTION_PRODUCT:TAN_MAT:LOCAL_CREATURE_MAT:LEATHER] in material_template_default.txt to [MATERIAL_REACTION_PRODUCT:TAN_MAT:MATERIAL:CREATURE_X:LEATHER]. Not sure about the exact syntax, but something similar to that
I'm pretty sure that the "generic tiered leathers mod" or whatever it's called uses the same method, but has three different leather templates that have [MATERIAL_REACTION_PRODUCT:TAN_MAT:MATERIAL:CREATURE_X:LEATHER], [MATERIAL_REACTION_PRODUCT:TAN_MAT:MATERIAL:CREATURE_Y:LEATHER] and [MATERIAL_REACTION_PRODUCT:TAN_MAT:MATERIAL:CREATURE_Z:LEATHER], where creatures X, Y and Z are actually creatures with names such as "regular", "rare" and "exquisite". The material templates used in creatures were then changed to match these depending on the material modifier of the creatures using a script.
It's really amazing what this community comes up with to solve seemingly simple problems.
Edit:
... Stuff about inorganic materials and stuff ...
This is actually a really interesting idea. I should really be studying for tomorrow's test, but if anyone else has time on their hands and could try this and then report their results here, that'd be neat. As I said, I was recommended to go with the nameless creature variant when I tried this, but I don't know if this method has ever been tried. And even if it has, I guess things can change between releases.