Error: This seat's taken, domain has already been used

When setting up your domain and email for the first time, you might receive this error if the domain already had email with Microsoft:

This seat's taken. Whoops! [Domain] has already been used to set up a Microsoft 365 account at Microsoft©.

This might happen if you set up your domain on a Microsoft 365 trial offer, and then purchased a plan later on. No worries, after you remove the domain from your Microsoft account, you'll be ready to use your domain with your Microsoft 365 from GoDaddy account.

Required: You must be in the new admin center to follow these steps.
The new admin center toggle

Go to portal.office.com and choose your domain's current account. Use your prior Microsoft 365 email address, password and select Sign in (your GoDaddy username and password won't work here).
Select Admin.
Select Users > Active users.
Select the check mark to the left of all users > the three dots > Change domains.
Use the drop-down list to select the domain ending in xxxx.onmicrosoft.com and read the alert. Changing the domain will change your users' email addresses, including yours. If their emails are also their usernames, this also changes how they sign in.
Select Save changes, which will sign you out. If you don't automatically sign out, select your profile icon and Sign out.
Sign back in to portal.office.com, but this time, select Use another account to sign in using your email address with the xxxx.onmicrosoft.com domain. For example, if you signed in using jane@coolexample.com, you'll now need to use jane@xxxx.onmicrosoft.com.
Select Admin.
Select Users > Active users.
All of your users should now be on the xxxx.onmicrosoft.com domain. Make sure all aliases are removed by selecting the display name directly for one of your users. In the panel that opens, if you see Aliases, select Manage email aliases.
Select the trash can to delete the aliases tied to the previous domain. Repeat for all users and Save changes.
If you have groups or shared mailboxes, you'll need to change the domain to xxxx.onmicrosoft.com for those as well. Select Groups > Groups.
Select the check mark to the left your group's name, and Edit name and description.
After the @, use the drop-down list to change the domain name and Save. Select Close to exit the panel, and repeat for all groups and shared mailboxes on your domain.
The domain can now be removed from Microsoft. Select Setup.
Next to Sign-in and security, select View under Get your custom domain set up.
Select Manage.
Select the check mark next to a xxxx.onmicrosoft.com domain and Set as default.
Select the check mark next to your custom domain > select the three dots > Remove domain.
Select Remove. Your domain was removed from Microsoft and now you can create new users in your Microsoft 365 from GoDaddy account!