Hi Zipster,
I think you live in the best country to buy leather and tools. However, let me suggest you some suppliers in Madrid:
For leather:
http://www.curtidosgaspargarcia.es/
http://www.roal.com/
http://www.tiendahipicaelvalenciano.com/
For tools:
http://www.curtidosvillaverde.com/
Roal, El valenciano y Curtidos Villaverde are located in the same area, very close. In the down town, in a place called "El rastro". In this area you can find many old stores that sell antiques. And on sunday morning there is a street market.
Please realise that Curtidos Villaverde and Roal are closed on Sundays.
Any way if you are interested in visiting these stores, please let me know before and I could go with you.
Best regards,
Jesús.