Lysosomal storage is the most common cause of neurodegenerative brain disease in preadulthood. However, the underlying cellular mechanisms that lead to neuronal dysfunction are unknown. Here, we report that loss of Drosophila benchwarmer (bnch), a predicted lysosomal sugar carrier, leads to carbohydrate storage in yolk spheres during oogenesis and results in widespread accumulation of enlarged lysosomal and late endosomal inclusions. At the bnch larval neuromuscular junction, we observe similar inclusions and find defects in synaptic vesicle recycling at the level of endocytosis. In addition, loss of bnch slows endosome-to-lysosome trafficking in larval garland cells. In adult bnch flies, we observe age-dependent synaptic dysfunction and neuronal degeneration. Finally, we find that loss of bnch strongly enhances tau neurotoxicity in a dose-dependent manner. We hypothesize that, in bnch, defective lysosomal carbohydrate efflux leads to endocytic defects with functional consequences in synaptic strength, neuronal viability, and tau neurotoxicity.