The city of Salamanca, once called "Hemlock" but renamed in honor of José de Salamanca y Mayol, 1st Marquis of Salamanca and Grandee of Spain (1811-1883) who had invested heavily in the region of western New York State, lies completely within the Allegheny Indian Reservation and is owned by the Seneca Nation.
The city is therefore exempt from all Federal, State and County taxes.
In order to maintain a municipal tax base, the Seneca Nation established a system of long-term leases. As covenants that run with the land these leases are transferrable from resident to resident. City taxes are assessed on the leases and are paid by the residents.
Members of the Iroquois Nations, about a third of Salamanca's residents, are exempt from the lease taxes, while non-Iroquois must pay them. The city no longer allows taxed properties to go into foreclosure, as this causes the leases to void. The property then reverts to the Seneca Nation, and is removed from the tax rolls.
In the 1990s, many of the long-term leases expired. As they had been leases with very small payments and no cost-of-living or valuation increases, the Seneca Nation attempted to rectify this problem by increasing the payments very significantly. This caused an outcry among the tax-paying citizenry, several foreclosures, and the relocation of several local businesses away from Salamanca. After much negotiation, a system of stepped increases was adopted. The current leases run until 2070.