It's not uncommon for horror movies to retcon the endings to their own sequels. In "Halloween 4," for instance, Michael Myers' supposed death in "Halloween 2" was ignored; in "Friday the 13th: Part 2," Jason Voorhees, who supposedly drowned as a child, was once again alive and well as an adult. The "Texas Chainsaw Massacre" franchise isn't immune to such twists of logic, either, as Leatherface died on-screen once, yet still remains the face of the franchise.
In "The Texas Chainsaw Massacre 2," Leatherface meets his demise at the film's end. After Lt. Boude "Lefty" Enright (Dennis Hopper) defeats the Sawyers, Drayton accepts defeat by blowing up himself, Lefty, Leatherface, and Grandpa (Ken Evert) atop the abandoned carnival grounds that the family calls home. Not to mention that, before Drayton killed his entire family with a grenade, Leatherface took a fatal blow to the stomach from Lefty's chainsaw.
When Jeff Burr took over the franchise in 1990, directing "Leatherface: The Texas Chainsaw Massacre III," he reversed Hooper's finality by taking the Sawyers back to middle-of-nowhere Texas, re-setting in an effort to rehash what happened in the first film 16 years prior. Suddenly, Leatherface was back, once again wielding his chainsaw and killing naive travelers. It's like he never left — even though we all saw him go.