Update 6/9/14 : Apparently Microsoft must have gotten tired of all the phone support and listened to us!! They now have a remove license option as well. When you log into your account click on Billing > Subscriptions and click on the subscription you want to change. You will then see a “change quantity” beside the current amount of user licenses. Click “change quantity”                                         and then remove or add licenses!!                             Thanks Microsoft, you made our job easier.

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First off you have to meet one of these three criteria’s to remove the unwanted license from your account.

A) Upgrading

B) Correcting a purchase made in error within 90 days of when the change was made.

C) Renewing

If you meet the criteria, you need to call Microsoft Technical support in your area. Here is the link for their customer support number.  If you are a Microsoft Partner call this number 1-800-676-7658 and select the cloud services option. They will remove the extra license for you.

Once I was on the phone with Microsoft, I asked if there was a way that I could remove the license myself. He said they (Microsoft) are the only ones that can remove Office 365 licenses from the account, system administrators can’t even remove them. In my opinion, this is rather stupid and I hope Microsoft changes their policies on that soon.  In the meantime, I hope this helps you out and if you find a easier solution to removing a Office 365 license let me know by posting in the comments.

This was posted by techspeeder.

Source: Office 365 Community